Enda Kenny
Question:111 Mr. E. Kenny asked the Minister for Finance the provision, if any, he has made in the Finance Bill to curb abuses of the C45 system in the construction industry; and if he will make a full statement on the matter.
Written Answers. - C45 Scheme Abuses.
The C45 scheme for sub-contractors was introduced in 1970 to counter tax evasion in the building industry. The sub-contract system has always been a feature of the building industry. The 1970 legislation recognised this and sought to ensure that tax due from the sub-contracting section of the industry would be collected. Forms C45 are completed by principal contractors on making payment to uncertified sub-contractors. Where such payments are made the principal contractor must deduct tax at 35 per cent on the gross amount of the payment.
The C45 system should not be availed of in situations where the employer/ employee rules should apply. As part of their audit programmes the Revenue Commissioners seek to ensure that the C45 system is not used inappropriately. In view of recent concerns about the operation of the C45 scheme, the Revenue Commissioners have been more vigilant to ensure that there is no abuse of the system. The Revenue Commissioners have also been asked to take measures to ensure that the system is applied only to genuine sub-contract situations and are having discussions with the Department of Social Welfare to see if procedures can be strengthened further.
Arising from theProgramme for Competitiveness and Work, I have asked the black economy monitoring group — composed of employer, trade union, Revenue and Social Welfare representatives — to carry out a thorough review of the operation of the C45 system, to make recommendations on action to curb any abuses and to improve the system generally. The group is due to report in July this year. It would be inappropriate to introduce legislative changes dealing with C45s in advance of the black economy monitoring group's report. Any legislative action should be based on full knowledge. The group's recommendations will provide this knowledge following an in-depth review of the entire system. Arising out of the review further consideration will be given to the need for legislation in this area.