Dáil Éireann díospóireacht -
Tuesday, 11 May 1993

Vol. 430 No. 5

Written Answers. - Retention Tax for Forestry Workers.

Austin Deasy

Ceist:

29 Mr. Deasy asked the Minister for Finance if he will reduce the 35 per cent retention tax for forestry workers who are precluded from obtaining a C2 certificate due to the nature of their work as timber cutters to 27 per cent in view of the severe hardship caused by the present tax rate; and if he will make a statement on the matter.

Minister for Finance (Mr. Ahern)

Section 17 of the Finance Act, 1970, provides that contractors in the Construction Industry are required to deduct tax from payments to sub-contractors unless the sub-contractor has a certificate of authorisation (C2 certificate) from the Revenue Commissioners. These provisions were extended to the forestry and meat processing industries by the Finance Act, 1992. The provisions were introduced to counter widespread abuse of the tax system within these industries.

The requirements for the issue of certificates of authorisation are set out in the law and are designed to ensure that only genuine sub-contractors, who are likely to comply with their tax obligations, qualify. Timber cutters will qualify for a C2 certificate if they are genuine sub-contractors and have complied with their tax obligations in the past or, if coming into the tax net for the first time, they can satisfy the Inspector of Taxes that they are likely to comply with their tax obligations in the future.

The rate of 35 per cent is applied only to those timber cutters who fail to meet the requirements for a C2 certificate. Deduction is applied to the gross payment made to the sub-contractor who is, however, allowed credit for tax deducted at source against his income tax liability. The 35 per cent rate is meant to be penal and is set at a level to ensure that it is a deterrent against abuse and an incentive for sub-contractors to get their tax affairs in order. I have no intention of decreasing the rate at this stage.