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Dáil Éireann debate -
Wednesday, 23 Feb 2000

Vol. 515 No. 1

Written Answers. - Public Contracts.

Brian O'Shea

Question:

136 Mr. O'Shea asked the Minister for Finance the proposals, if any, he has to ensure that building contractors' tax affairs are in order prior to them commencing work under any contract either in the public or private sectors; and if he will make a statement on the matter. [5363/00]

Building contractors tendering for work on projects funded by public money are subject to tax clearance. In the case of all public sector contracts of a value of £5,000, inclusive of VAT, or more within any 12-month period, and in the case of grants exceeding £500 for construction work, contractors are required to produce either a valid tax clearance or C2 certificate. To obtain tax clearance certificates applicants must have complied with their obligations regarding the payment and remittance of any taxes, interest and penalties and the delivery of returns due to Revenue.

Where the contract is with certain public bodies, principally local authorities, Departments and boards established by or under statute, the contract is subject to relevant contracts tax. This means that tax at 35% is deducted from payments to the contractor unless the contractor produces a C2 certificate to the public body and the Revenue Commissioners issue a relevant payments card, authorising payments to be made without deduction. A C2 certificate is issued only where the contractor's tax affairs and the tax affairs of certain associates – for example, partners, companies in which the contractor was a proprietary director or employee – have been up to date over a period of years.
Where the contract is in the private sector, relevant contracts tax also applies where the principal contractor subcontracts the work or where the contract is with a person who carries on a business which includes the erection of buildings or the manufacture, treatment or extraction of materials for use in construction operations.
Apart from the foregoing, contractors in the building industry are subject to the routine tax compliance and audit campaigns operated by the Revenue Commissioners.
I have no plans to introduce a system whereby a contractor in the construction industry would be obliged to prove that his or her tax affairs are in order before commencing a contract in the private sector. The existing arrangements balance the State's need to protect its flow of tax revenues and the needs of business to function without an excess of regulation. However, the procedures relating to tax clearance for building contractors will be kept under review.
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