Recent years have seen a growing importance of self-employment in the construction sector. The result of this change in working patterns has given rise to extensive use of the C2/C45 system. These are forms issued by or on behalf of the Revenue Commissioners. To qualify for a C2 a sub-contractor's tax and PRSI affairs must be in order. If the sub-contractor does not have evidence of C2 status, the contractor is required to deduct 35 per cent of any moneys paid to sub-contractors as a retention tax and sends this money to the Revenue Commissioners. For those not holding C2s, the main contractor gives the sub-contractor a form, C45, which sets out the gross amount of money to the sub-contractor as well as the amount deducted for tax, and the amount actually paid to the sub-contractor.
I am aware of recent controversy in relation to the issues which are raised by the use of these forms in the construction sector. I have arranged for a review of the operation of the system and its implications for the social welfare system. I can confirm that the review will involve consultations with the trade unions concerned and with representatives of employers as well as with the Revenue Commissioners and other interested State bodies.
Under the Programme for Competitiveness and Work the Revenue Commissioners will be asked to take measures to ensure that the C45 system is applied only to genuine sub-contract situations. Revenue will discuss the matter with my Department to see if procedures can be strengthened further. In addition the black economy monitoring group will be asked to carry out a thorough review of the operation of the C45 scheme and to make recommendations on action to curb any abuse and to improve the scheme generally. Pending the outcome of the review, the Revenue Commissioners will take measures to prevent the C45 system being applied where PAYE would be the appropriate system.