Dáil Éireann díospóireacht -
Tuesday, 9 Mar 1993

Vol. 427 No. 6

Written Answers. - Black Economy.

Peter Barry

Ceist:

71 Mr. Barry asked the Minister for Finance his views on the suggestion that the black economy in the construction industry is still a matter of major concern; whether further action is necessary to combat the situation where it is claimed that the black economy operators have a 60 per cent competitive advantage; if £350 million yearly is involved in these activities; if there is a consequent loss in legitimate employment to the industry of some 12,000 people annually; and if he will make a statement on the matter.

Minister for Finance (Mr. B. Ahern)

The Government are fully aware of the problem of the black economy and special measures have been taken, particularly in relation to the construction industry to counter this problem.

It is not possible to estimate the extent of black economy practices in any particular industry. However, given the extent of direct state involvement in building activity and the level of control exercised by the Revenue Commissioners and other areas of the State over the construction industry it is highly unlikely that a black economy of the size referred to by the Deputy exists.

In the first instance tax clearance procedures ensure that the vast bulk of construction work involving Government contracts and grants is made available only where the contractors concerned have an up-to-date tax record. The Revenue Commissioners operate a wide range of measures to ensure that tax obligations are met.

Regulations governing sub-contractors ensure that tax is deducated by principal contractors unless the sub-contractor has a satisfactory tax record. The procedure has been strengthened recently by new measures ensuring the identity of the sub-contractor where payments are to be made without deduction of tax.

The Revenue Commissioners operate on an ongoing audit programme to combat the black economy in the industry. In the calendar year ended 31 December 1992, the Revenue Commissioners carried out 190 self assessment audits in the construction industry area. These audits resulted in a yield of £2.6 million. Special investigations in relation to the construction industry were undertaking in 40 cases and yielded £2.2 million in 1992. In addition to the 190 self assessment audits referred to above the Revenue Commissioners carried out a further 1,971 audits specifically in relation to the Construction Industry Tax Regulations. The total yield from these visits was £9.1 million.

The Revenue Audit Programme is being reorganised on a sectoral basis with the designation of inspectors to specialise in particular sectors. The Revenue have identified the construction industry as an area that requires a significant audit emphasis. In Dublin, two districts are being set up to deal with the construction industry as follows:Construction and Property District 1 (Dealing mainly with payment controls). Construction and Property District 11 (Dealing mainly with a property development aduits). These districts will be operational within a matter of weeks.

In districts outside Dublin, in addition to the ongoing Construction Industry and Audit Programme, an additional officer is being assigned to specialise in outdoor duties with an emphasis on site visits to detect persons who are not currently registered for tax. The work of this officer will be supported by another who will be investigating all areas of the black economy. These developments will lead to better targeting of tax defaulters in the black economy.

A supporting computer system has been introduced which provides a database of information in relation to principal contractors and sub-contractors and thereby assists in monitoring the use of certificates authorising principal contractors to make payments without deduction of tax.

Inspections are also carried out by the Department of Social Welfare with a view to ensuring compliance with Social Insurance regulations in relation to payment of contributions and to claims for welfare repayments.

The measures undertaken by Revenue and Social Welfare are kept under review by the black economy monitoring group, which includes representatives of the Construction Industry Federation. That group makes recommendations on measures which might prove useful in combating the black economy.