Vol. 389 No. 4
asked the Minister for Finance if he intends to introduce a clearance certificate system for contractors rendering services in the beef processing and storage sector; if he has satisfied himself with existing arrangements for the payment of tax, PRSI and VAT in respect of such activities; and if he will make a statement on the matter.
31.
asked the Minister for Finance if his attention has been drawn to the widespread practice in the beef processing industry of hiring independent contractors in Northern Ireland to carry out operations at plants in the State; whether such contractors are liable to be treated as employees for tax purposes in the State; whether payments to such contractors are subject to VAT; and if he will make a statement on the revenue implications for the State arising out of such practice.
I propose to take Questions Nos. 12 and 31 together.
I am advised by the Revenue Commissioners that they are satisfied in general with tax compliance in the beef-processing industry. While they are aware of the possibility of some abuses in the operation of PAYE/PRSI and VAT in the industry, the Revenue Commissioners are involved in ongoing monitoring in order to identify and counteract such abuses. The Commissioners have informed me that existing monitoring arrangements are adequate and that they do not consider that the introduction of a tax clearance certificate system for contractors is warranted at present.
The Revenue Commissioners have informed me also that they are aware of the practice in the beef processing industry of hiring contractors from Northern Ireland to carry out operations at plants here but they have no information to suggest that the practice is widespread or that it has any significant revenue implications.
Whether a contractor would be treated as an employee or a self-employed person for tax purposes would depend on the terms of his contract. Under a contract to provide specific services, the contractor would be treated as a self-employed person liable to tax on his net profits. If such a contractor is a resident of Northern Ireland, he would be liable to tax here only if his business is carried on through a permanent establishment in the State. If, on the other hand, the contractor were regarded as an employee for tax purposes, payments to him would be liable to tax here under the PAYE system even if he were resident in Northern Ireland.
As regards VAT, the position is that if the contractors are treated as employees there is no VAT liability as employees are outside the scope of the VAT system. If the contractors are not treated as employees, they would be required to register for VAT in relation to the services they provide, subject to the normal VAT rules. The rate of VAT chargeable would be determined by the nature of the service and the conditions of the contracts.
Would the Minister agree it is obvious that substantial use is being made in the beef processing industry of gangs of workers carrying out essentially manual tasks at plants in the Republic and that in addition to that fact being obvious even to the dogs in the street it is also the case that where moneys are paid to contractors for those kind of works they do not at the moment attract any PAYE or income tax liability because those people are not being treated as employees for the purpose of the Tax Acts? Would the Minister not agree also that no liability for VAT arises in the case of such people because they do not have a permanent place of business in the Republic? In view of all those things, does the Minister not agree that manual labour is being employed wholesale in the beef industry here without any liability to tax, PAYE, PRSI or VAT of any kind and this constitutes an abuse?
If that were happening in the way the Deputy has described it would constitute a major use. This is a tax compliance question with which we are dealing, and the Revenue Commissioners are generally satisfied with compliance in the beef processing industry, including compliance by independent contractors. The Revenue Commissioners are not aware of any widespread abuse by Northern Ireland contractors but indicate that they may operate more in Border counties than in other areas. The tax status of such contractors has already been set out by me. They accept that there may be particular companies with localised problems about the incorrect operation of PAYE, PRSI or VAT but there is no evidence of any significant irregularities common to one group of companies or to the meat industry as a whole. If the Deputy has information to suggest that there is such widespread abuse as he has alleged here, I will be only too glad to pass it on the Revenue Commissioners who will take immediate action.
I suggest that the word "abuse" as used by the Minister is different from the word "abuse" as used by me, because if there is no liability at law for PRSI, VAT or PAYE in the case of the retention of these people's services south of the Border, then the Revenue Commissioners, as the law stands at present, cannot say that there is an abuse of the tax system. However, there is a loss of revenue in the employment of people outside of the State who, if they lived inside the State, would be liable for some or all of these taxes. This is a widespread practice and it is a matter which should not come to the Minister's notice from the Revenue Commissioners on the basis that there is an effort to defraud the Revenue. It is a circumvention of the whole tax system that is occurring in the beef processing industry. It must be obvious to anyone, including a Revenue official, that this is going on wholesale in the beef industry.
The Revenue have said they have no evidence of widespread abuse as suggested by the Deputy. The Northern Ireland contractors down here are treated as employees. They have to pay PAYE and the company that employs them is responsible for that payment. The company is responsible under tax law and the Deputy is familiar with that. It is very difficult to make a judgment in the absence of specific information as to a contract being so devised as to circumvent the system. I can only repeat what the Revenue say and if the Deputy has any more information that the practice is widespread I would only be too happy to take it up with the Revenue Commissioners.
Is the Minister aware that a recent review by the trade unions in the industry showed that the practice was growing substantially, whereby companies were being taken over in the industry and the employees were then being classified as sub-contractors and the employer as such, is denying any further responsibility in relation to PAYE, PRSI or any such payments and that the employees are now being paid on a block basis? Surely the same regulations as apply to forestry and to the construction industry should apply to that industry as well? Will the Minister ask the Revenue Commissioners to contact the ITGWU and seek the information which they have made available in this regard.
I will be happy to do that.
