Vol. 490 No. 3
14 Mr. Sargent asked the Minister for Social, Community and Family Affairs the valuation placed on the black economy operating in this country; the measures, if any, his Department is putting in place to deal with this problem; and the type and level of action, if any, being taken against employers who pay under the counter payments. [10130/98]
Experience in Ireland and internationally shows that it is difficult to estimate the value of activity in the black economy. Of its nature, this activity is designed to be hidden from the authorities, so that measuring it is subject to many difficulties.
Typically, the black economy is taken to include activities such as non-declaration of income or off the books business to evade taxation or other statutory liabilities, or claiming social welfare benefits while working. A range of activities is in place in my Department aimed at preventing and deterring such activity and detecting it where it occurs. These activities include regular checks on the entitlements of persons receiving payments and inspections of employers and their records to ensure that they are meeting their obligations under the Social Welfare Acts.
Some 600 staff are engaged full-time on anti-fraud and abuse measures, a key element of which is a programme of employer inspections being carried out each year, with some 8,000 employers visited in 1997. As part of this inspection programme, inspectors from my Department form part of a nationwide joint inspection unit with inspectors from the Revenue Commissioners. This unit uses the combined legal powers and expertise of both organisations to tackle abuses in both the social welfare and tax systems.
Employer inspections undertaken by my Department comprise a number of tasks such as detailed examination of employers' records to ensure that accurate records of employees are being maintained and that correct PRSI payments are being made by employers in respect of all their employees; checks to ensure that employees are not concurrently working and claiming social welfare payments; checks to ensure that the correct class of PRSI is being deducted; outlining employers' responsibilities with regard to social welfare legislation and, where Revenue staff are part of the inspection team, tax legislation and giving advice and information to employers on matters such as the operation of the PRSI system, incentives available to employers, employees' entitlements and the correct classes of contributions.
All cases of fraud by individuals or failure by employers to comply with their legal obligations are considered for criminal proceedings. In 1997, a total of 245 cases, of which 61 referred to employers, were sent to the Chief State Solicitor's Office for prosecution. The penalties available to the courts in respect of those convicted range to fines of £10,000 and-or three years in prison. During the year 112 persons were convicted by the courts, of which 39 were employers.
I am aware from discussions and correspondence with employer and union interests of concerns that, in some industries, workers insurably employed under contract of service are required to revert to self-employment type arrangements, known as the C45 system, to secure or remain in employment and my Department is in discussions with the Revenue Commissioners with a view to taking additional measures to ensure that employers fully comply with their legal obligations in this regard.
I am also conscious of the fact that many employers have expressed concern in relation to difficulties they experience in filling vacancies. A special effort to match workers to vacancies in the construction industry is being undertaken by my Department, FÁS and the Construction Industry Federation, and I compliment them on that.
My Department is also represented on the black economy monitoring group which also involves the Revenue Commissioners, the Irish Congress of Trade Unions, the Irish Business and Employers' Confederation, the Small Firms Association and the Construction Industry Federation. The objectives of this group, which was set up in 1988, are to monitor developments in the black economy and to review the effectiveness of measures taken to combat tax and social welfare fraud. I am keeping the effectiveness of anti-fraud and anti-abuse measures under review and whatever changes or additional measures that are appropriate in the light of experience will be made.
I thank the Minister for his reply. I realise it is not possible to be categorical about this area but given that the Minister cannot give us even an estimated figure on the value of the black economy, will he accept that the Celtic tiger phase of the Irish economy has been assisted in some way by the continuation of a black economy given that GDP and GNP does not discriminate between honest and dishonest money — the spending of the money is what is being measured? Will the Minister accept that we may have to sacrifice some of the benefits of that phenomenon and redouble our efforts to end the abuse by employers, and indeed the self-employed, in the various sectors because the shortfall of tax revenue is starving State-supported services? Regardless of the "blue flu" among gardaí on Friday, the criminal activity of tax evasion will continue. What plans does the Minister have to redouble those efforts given that those to date do not deal adequately with the problem?
I do not accept that current efforts do not deal adequately with the problem. By its nature the problem of the black economy is difficult to address. As I said earlier, 600 people in my Department are employed full-time to ensure taxpayers' money under the social welfare code goes to the people who deserve it. The total staff of 4,100 in the Department, who are employed to deal with the 800,000 people who come in contact with the Department on a daily and weekly basis, also have a duty to ensure that the money being spent on behalf of taxpayers is going to the right people. When I went into the Department one of the first areas I examined was control of spending. I thought I could bring some wisdom to the Department but I found that the Department is keenly aware of its responsibilities and has a comprehensive mechanism to ensure, as best as is possible within the restrictions of the law, that taxpayers' money is wisely spent.
I am sure the Minister will accept there are enormous savings to be made under this category; we saved £160 million alone last year with the measures that have been taken. Will the Minister accept that further substantial savings can be made? Has he taken note of the statement last weekend by a leading trade union official who referred to 50,000 workers in the building trade who were in the black economy? Will the Minister accept if that is the case — I do not know but I have reason to believe the number is significant — the loss to the Exchequer from the point of view of the payment of social welfare, the loss of PRSI and income tax could be in the order of £300 million per year? Will the Minister accept that further action is urgently needed to deal with this problem?
Evidence has come to light lately of young workers seeking employment being told they cannot be employees but were presented with a scheme which involved setting up a company which would then employ them. That company would then be established as an independent contractor to the employer. Will the Minister accept that, apart from loss of revenue to the Exchequer, this method does not provide fair protection to young workers? Will he undertake to investigate this practice which could develop around the country?
I referred to the Deputy's latter point in my reply. I said we were keenly aware of what is called the C45 subcontractors issue.
It is a bit more complicated than the C45 approach.
We are conscious of all the efforts that have been made and that is why we are in constant contact with the organisations representing the various sectors. My Department is in discussion with the Revenue Commissioners with a view to taking additional measures in relation to this whole area, but I would be loath to give figures as to the extent of this issue.
What is the Minister's reaction to the 50,000?
Deputy O'Keeffe's colleague, Deputy McGrath, wants to ask a brief supplementary.
It has been alleged to me that because of a curtailment of travel expenses, etc., some of the Department's social welfare inspectors are confined to base for perhaps two days per week. Is the Minister satisfied that his inspectors have the necessary resources to be mobile and carry out their investigations?
I am constantly in contact with my Department officials in regard to the resources being made available to this whole area. I am satisfied that sufficient resources are available at this time. If there are particular difficulties of which the Deputy is aware, perhaps he might bring them to my attention.
That concludes Question Time for today.
Written Answers follow Adjournment Debate.
