Paul Murphy (Dublin South West, Socialist Party)
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66. To ask the Minister for Finance if the Revenue monitoring agency for relevant contract tax C2 holders is still in place; if not, when it was abolished; and when the deduction form RCT1 was discontinued. [9433/15]

Michael Noonan (Limerick City, Fine Gael)
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I am informed by the Revenue Commissioners that, with effect from January 2012, the paper based Relevant Contracts Tax system was replaced by an electronic Relevant Contracts Tax (eRCT) system.  Interactions between principal contractors and Revenue as regards Relevant Contracts Tax are now by way of electronic means.  Under the eRCT system, a principal contractor is obliged to notify Revenue electronically when he/she enters into a relevant contract with a subcontractor and whenever he/she makes payments under that relevant contract.

Under the eRCT system the paper based C2 Certificate was discontinued.  Consequently, the term C2 holder is no longer valid.  Instead, a sub-contractor is allocated a deduction rate - 0%, 20% or 35% - at which tax is to be deducted from payments made by a principal contractor to that sub-contractor under a contract in the construction, meat processing  and forestry sectors.  The rate of tax deduction to apply depends on the sub-contractor's tax compliance record.  A person who previously held a C2 Certificate under the old regime is likely to be allocated a 0% tax deduction rate in the new regime.

I am advised by Revenue that the then National C2 Monitoring Group, made up of compliance staff from each of the four Revenue Regions, was established under Revenue s 2006 Construction Industry Plan.  Its role was to monitor suspect cases, share intelligence and take appropriate action to deal with abuses of the RCT system.  While this Group no longer exists, monitoring abuses of the tax and duty systems, including the eRCT system, is a key element of Revenue's day to day compliance programmes. 

Revenue's policing of the RCT regime has been significantly improved through a number of risk mitigation initiatives.  Firstly, the old RCT regime provided for the making of RCT repayments to sub-contractors on foot of a claim made by the sub-contractor.  This particular feature of the old regime was open to abuse and consequently the new RCT regime no longer provides for the making of repayments except in very exceptional cases.  Secondly, a VAT Reverse Charge mechanism introduced in 2008 places the responsibility for accounting for VAT on construction contracts on the principal contractor, thereby removing the risk of VAT non-compliance by the sub-contractor.

I am advised by Revenue that it commits significant resources to compliance interventions in the construction sector.  There were over 14,000 tax compliance risk interventions in the Construction Sector in 2013 and over 15,000 such interventions in 2014. In addition, the Revenue Commissioners work closely with the Department of Social Protection and the National Employment Rights Agency including conducting joint operations in the construction sector with both bodies.  

Regarding the Form RCT1, I am advised that this was not a tax deduction form but rather was a paper based notification by principal contractors to Revenue of certain details regarding the nature of the contract arrangements they had with each sub-contractor.  These details are now supplied to Revenue through the eRCT system.