Peadar Tóibín (Meath West, Sinn Fein)
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13. To ask the Minister for Finance if he will provide in tabular form the annual tax revenue collected and tax refunds relating to relevant contract tax between 2008 and 2014. [45936/14]

Michael Noonan (Limerick City, Fine Gael)
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Regarding the annual tax revenue collected and tax refunds relating to Relevant Contracts Tax (RCT) between 2008 and 2014, figures have been provided to me by the Revenue Commissioners.  However, I would like to provide some additional detail to the Deputy regarding RCT generally and the figures supplied.

Firstly, the Deputy will be aware that the primary purpose of the RCT regime is not to generate significant tax yield for the Exchequer.  Instead it provides a mechanism to address tax compliance risks in certain sectors where the practice of sub-contracting activities is a significant feature of the operational model in the sector.  Under RCT, tax deductions at source may apply to payments made in relation to contracts in the construction, forestry and meat processing sectors.

Secondly, where amounts are deducted at source from contract payments made by a principal contractor, these tax deducted amounts are generally not repaid but are instead available for offset by sub-contractors against other tax liabilities that they may have.

As the Deputy has requested information for the period 2008 to 2014, this period covers both the original paper-based Relevant Contracts Tax system and its successor, the electronic Relevant Contracts Tax system, which came into effect on 1 January 2012.  Depending on whether a contract payment was made under the current or the previous system, there are differences in when deduction at source applies and in the quantum of any such deduction.

Prior to the introduction of the electronic Relevant Contracts Tax system in 2012, principal contractors were obliged to deduct tax at 35% on all payments to sub-contractors unless the sub-contractor had a C2 certificate and certain other documentation which allowed the principal to make contract payments gross to the sub-contractor.  At times, this resulted in excessive amounts of tax being withheld which required sub-contractors to claim refunds of these overpayments.  This could be done annually at income tax filing time, or at any time during the tax year as interim refunds were a feature of the old system.

With the electronic RCT system, a sub-contractor is assigned a deduction rate of 0% if their tax affairs are fully compliant, 20% if their tax affairs are substantially compliant, or 35% where the sub-contractor is significantly non-compliant.  

Since the introduction of the new electronic RCT system, the practice of claiming refunds does not generally arise as the new system automatically assigns  a credit of all tax deducted  by principals against the sub-contractors income tax liability and so the figures for repayments includes amounts that have been offset against other tax balances. There are no interim repayments under the eRCT system.