Committee of Public Accounts (PAC) launches report on Revenue Commissioners and calls for an independent investigation into ‘bogus self-employment’

The investigation should include examinations of the magnitude of revenue lost to the State as a result of this practice, the number of workers impacted by the agreement in the sector, and the financial cost to those workers.

The report also recommends an increase in site visits across a number of sectors to identify instances of ‘bogus self-employment’ and a recommendation to replace the existing Code of Practice with legislation to provide stronger and more comprehensive definitions of employment and self-employment.

In its report published today on the Examination of the 2019 Appropriation Account for Vote 9 – Office of the Revenue Commissioners, the Committee makes recommendations on five issues which were discussed with the Comptroller and Auditor General and the Revenue at a meeting of PAC on 19 November 2020. These are:

·        No breakdown of the individual taxes included within the heading Excise Duty;

·        Implementation of the Temporary Wage Subsidy Scheme (TWSS);

·        Bogus self-employment across all sectors;

·        Bogus self-employment in the courier sector stemming from a 1997 agreement;

·        Revenue response to an EU Commission inspection report in 2019.

Deputy Brian Stanley, Cathaoirleach of PAC, said: “Official statistics in relation to the financial impact of ‘bogus self-employment’ in Ireland are not available as the practice is inherently difficult to quantify, so estimates as to the impact on the Exchequer vary. While we don’t know exactly how much the practice is costing the Exchequer, there is no doubt it is significant.

“The Minister for Finance advised the Dáil in November 2019 that compliance interventions carried out in the construction sector generated a yield of approximately €166 million in the years 2016, 2017 and 2018 combined.”

The Committee is concerned that the potential tax lost to the Exchequer due to ‘bogus self-employment’ may be significant. PAC recommends that Revenue:

•       Increases site visits across all employment sectors to ensure a minimum of 4,000 visits per annum from 2022 with year-on-year increases thereafter;

•       Publishes statistics on site visits conducted, individuals interviewed, and the number of individuals reclassified as employees or newly registered for PAYE on an annual basis; and

•       Brings forward legislation to replace the existing Code of Practice to provide stronger and more comprehensive definitions of employment and self-employment.

Deputy Stanley said: “Following the meeting with Revenue, the Committee received correspondence regarding a voluntary PAYE system agreed by Revenue and courier firms in March 1997. The submissions included correspondence from Revenue which outlines the conditions of the voluntary PAYE system available to couriers, and asserts that couriers that fulfil a number of criteria should ‘in the interests of uniformity’ be treated ‘as self-employed for tax purposes’.

“Revenue confirmed this arose from a Social Welfare Appeals Officer’s decision by which ‘couriers were regarded as self-employed for PRSI purposes’. However, the Committee is concerned that the decision to treat couriers as self-employed has resulted in a loss to the Exchequer in uncollected taxes and a loss to the workers affected by this agreement in benefits that self-employed individuals cannot claim. Therefore, the Committee recommends Revenue commission an independent examination of the financial and sectoral implications of Revenue’s agreement with the courier sector in 1997.”

On the matter of the Temporary Wage Subsidy Scheme (TWSS), introduced to support employees whose employers were affected by the Covid-19 pandemic, and which operated from 26 March 2020 to 31 August 2020, providing more than €2.8 billion in supports to 66,500 employers representing 664,000 employees. The Committee noted that during the transitional phase of the TWSS, which operated to 3 May 2020, the maximum entitlement of €410 was paid out to employers for each qualifying employee for six weeks, which resulted in a significant additional cost to the Exchequer and reconciliation balances which had to be recouped.

Deputy Stanley said: “Revenue acknowledged that some mistakes were made during the transitional phase of the TWSS and the Committee is concerned that the maximum weekly subsidy of €410 was paid out to each qualifying employer during the transitional phase of the scheme. The Committee recommends that for any future schemes that are rolled out as a matter of urgency, Revenue uses the lessons learned from the TWSS to reduce the potential for overpayments, and the timeframe for resolving them.”

The PAC Report Examination of the 2019 Appropriation Account for Vote 9 – Office of the Revenue Commissioners is available on the Oireachtas website.

The PAC is a standing committee of Dáil Éireann which focuses on ensuring public services are run efficiently and achieve value for money.