I am informed by the Revenue Commissioners that the form C45 has now been replaced by a new form known as the form RCTDC, relevant contracts tax deduction card. This form is part of the relevant contracts tax, RCT, system which applies to payments to self-employed subcontractors in certain industries, including the construction industry. The system does not apply to employment contracts, which come within the PAYE-PRSI system. Before entering into a contract to which RCT will apply, the subcontractor and principal contractor are required to sign a declaration to the effect that, having regard to guidelines issued by the Revenue Commissioners. they have satisfied themselves that the contract they are about to enter into is not a contract of employment.
I am informed that the Revenue Commissioners consider that the RCT system is a valuable tool in their fight against tax evasion in the construction industry. The system was introduced in 1970 as a means of countering the lump system in the industry.
The Revenue Commissioners undertook a special project in 1997, 1998 and 1999 to check on the operation of PAYE-PRSI in the construction industry. This campaign included site visits to more than 7,000 contractors and entailed an examination of the declarations by reference to the particular circumstances of the person employed. Where the sub-contractor status was considered to be inconsistent with the terms of employment the principal was asked to deduct PAYE-PRSI and levies. In the course of the campaign, the tax status of over 61,000 subcontractors was considered.
The results of the campaign indicate that 88% of principal contractors visited had either correctly classified all employees-subcontractors or agreed to abide by the ruling of the Revenue as to the correct classification. A number of follow-up visits will be made to ensure continued compliance in a sample of these cases. Cases in which workers were incorrectly classified and which did not accept Revenue's ruling in the matter are being dealt with in the course of the Revenue audit programme for 1999-2000. It is considered that the results of the campaign do not justify a further campaign of this nature, in the short-term at least. Such a campaign would tie-up significant Revenue resources, which would mean that other areas of possible evasion would not receive the attention they might deserve.
The operation of PAYE-PRSI is one of the items checked in the course of routine Revenue audits. By implication, that check entails a check on the use of forms RCTDC. Where an employer is found to have failed to operate PAYE-PRSI in respect of payments to employees, the employer is liable for the tax, PRSI and levies which should have been deducted on payment together with the employer's portion of PRSI, interest and penalties.