Dáil Éireann debate -
Wednesday, 5 Apr 1995

Vol. 451 No. 6

Written Answers. - Black Economy Monitoring Group Report.

Mary Harney

Question:

49 Miss Harney asked the Minister for Finance whether he will publish the report of the Black Economy Monitoring Group; if he has satisfied himself with the operation of the C2 certificate system; and if he will make a statement on the matter. [6956/95]

Minister for Finance (Mr. Quinn)

Legislation was introduced in 1970 to deal with payments within the construction industry where employment status does not exist. The legislation introduced a withholding tax which became known as C45 tax because the C45 is the form which evidences payment of tax. Subcontractors are entitled to exemption from the withholding tax where they fulfil certain conditions e.g. they have a fixed place of business and a tax compliance history. Such subcontractors are issued with a certificate known as C2.

A more secure form C2 was introduced for the tax year 1993-94et seq. The new C2 is a plastic card on which the subcontractor's photograph and signature has been encrypted. The new C2 has substantially reduced incidences of abuse. Where abuse is detected, it is followed up and appropriate action is taken, including, if appropriate, the withdrawal of the C2. I am satisfied that the C2 system is working well and that its security has been enhanced by the new procedures.

Where a subcontractor does not qualify for a C2, tax is deducted on payments made by a principal contractor to a subcontractor under the C45 system. The subcontractor is entitled to set this tax against his income tax liability and to reclaim any excess. The C45 system does not apply where the individual to whom payments are being made is an employeee of the payer. In these circumstances the appropriate system of tax deduction is the PAYE system.

Under theProgramme for Competitiveness and Work the Black Economy Monitoring Group was asked to carry out a thorough review of the operation of the C45 system and to make recommendations on action to curb abuse and to improve the system generally. The group, which included representatives from the employers side, the trade unions, the Department of Social Welfare and the Revenue Commissioners presented its report in June 1994 and its recommendations were endorsed by the Central Review Committee of the Programme for Economic and Social Progress. The question of publication of the report would be a matter for the Central Review Committee.

The majority of the group's recommendations concerned closer monitoring of the system by the Revenue Commissioners, improved information flow between the Revenue Commissioners and the Department of Social Welfare and the redesign of forms to ensure that sufficient information is available to match income tax and social welfare records. The Revenue Commissioners are in the process of implementing these recommendations. Two of the recommendations will require statutory changes to carry them into effect and are being considered in the context of the Finance Bill.

I am satisfied that the implementation of the recommendations of the Black Economy Monitoring Group will substantially improve the operation of the C45 system, although it may be too soon as yet to see the impact of these changes in the form of changing trends in the construction industry.