Dáil Éireann debate -
Wednesday, 26 Jan 1994

Vol. 437 No. 6

Written Answers. - Tax Abuse.

Tony Gregory

Question:

173 Mr. Gregory asked the Minister for Finance if there is evidence of serious abuse of the C45 tax form by employers on building sites; if this matter has been investigated by his Department; and if he will make a statement on the matter.

Minister for Finance (Mr. B. Ahern)

Principal contractors are required to complete Form C45 on making payments to sub-contractors who have not been certified by the Revenue Commissioners to receive payments without deduction of tax. Where such payments are made the principal contractor must deduct tax at 35 per cent of the gross amount of the payment; no reduction is made for expenses or allowances. Copies of the forms are provided to the sub-contractor and to the Revenue Commissioners.

There is a tight system of control supported by an outdoor inspection programme which, inter alia, supervises and monitors the system generally and also follows up specific cases where there is attempted or suspected abuse. In the past week the Revenue Commissioners have become aware of a campaign by construction workers against attempts by contractors to place employees on the C45 system. The Revenue Commissioners have not been approached directly on this issue but note from the media that some contractors have in recent times attempted to change the status of employees to sub-contractors.

Whether a person undertaking work for a contractor should be dealt with for tax and social welfare purposes as an employee or as a sub-contractor depends on the relationship between both parties. There are established criteria in law for determining this issue. A contractor who is in fact an employer must operate the PAYE system and cannot use the C45 system in relation to that employee. In view of the concerns in this area the Revenue Commissioners propose to be increasingly vigilant to ensure that the C45 system is not applied where PAYE would be the appropriate system.

Sub-contractors under the C45 system have the usual obligations as self-employed persons to make returns and payments. Such returns can be subject to the normal Revenue audit and compliance programmes. There are other safeguards in that the joint investigation units of the Department of Social Welfare and Revenue make site visits to detect possible abuses of the tax and social welfare systems. The Department of Social Welfare have regulations whereby a principal contractor taking on new employees or sub-contractors must notify that Department.

In view of the concerns expressed about this issue I am asking the Black Economy Monitoring Group to investigate the matter to see if any further changes need to be made to the system to counter abuses.