Written answers

Tuesday, 31 March 2015

Department of Finance

Departmental Investigations

Photo of Richard Boyd BarrettRichard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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270. To ask the Minister for Finance if he has held an investigation, or plans to hold an investigation, into allegations of widespread abuse of the relevant contracts tax 1 sub-contracting regime in the construction industry; and if he will make a statement on the matter. [6118/15]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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This Question has been transferred to my Department as matters relating to Relevant Contracts Tax (RCT) are tax matters. With effect from 1stJanuary 2012, the administration of RCT moved from being a manual system to an electronic one (the eRCT system).

As the Deputy's Question was directed in the first instance to Minister Bruton, I think it useful to point out that, while the eRCT system facilitates the deduction of income tax at source from payments made under contracts in the construction, forestry and meat processing sectors, it is not intended to, nor does it, underpin, or relate to, matters such as employment rights (including rates of pay), the (former) Relevant Employment Agreements (REAs), pensions or PRSI entitlements.

The eRCT system, being a tax deduction system, is under the care and management of the Revenue Commissioners.  As the Deputy may be aware, under Section 101 of the Ministers and Secretaries (Amendment) Act 2011, the Revenue Commissioners are independent in the performance of their functions under, or for the purposes of, a relevant Act such as the Taxes Consolidation Act 1997. 

The Deputy's Question does not set out the detail or extent of the alleged wide-spread abuse. However I am informed by the Revenue Commissioners that the allegations probably relate to what is known as 'bogus self-employment' in the construction sector, that is, erroneously describing an employee as a self-employed contractor.

There are safeguards, which have been designed into the eRCT system, for those individuals who may have concerns that they are caught up in "bogus self-employment". Firstly, a principal contractor has a statutory obligation to notify Revenue through the eRCT system of details of all contracts entered into with a sub-contractor and secondly, on receipt of these contract details, Revenue issues a "Contract Confirmation" letter directly to the individual who is described by the principal as being the sub-contractor. On receipt of the "Contract Confirmation" letter, a sub-contractor is obliged to notify the Revenue Commissioners if they believe that they are not a sub-contractor but are more correctly an employee and Revenue will take the necessary steps to investigate the matter.

The construction sector is an acknowledged area of high risk internationally and in Ireland it is no different. I am informed by the Revenue Commissioners that the monitoring of abuses of the tax and duty systems in the construction sector forms part of Revenue's ongoing compliance programmes into which they commit significant resources. I am further informed by the Revenue Commissioners that 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.

As to allegations of abuse of the tax system, I am informed by the Revenue Commissioners that if the Deputy has specific information relating to individuals or business groups in the constructor sector who are abusing the tax system, he may pass that information directly to the Revenue Commissioners for investigation. I am also informed that the Revenue Commissioners have provided a specific template on their website at which facilitates anyone who wishes to report instances of shadow economy practices.

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