Dáil Éireann - Volume 486 - 10 February, 1998
Written Answers. - Contract Workers.
Mr. R. Bruton Mr. R. Bruton
190. Mr. R. Bruton asked the Minister for Finance if he will report on the progress being made in implementing measures to counteract the use of contract workers in the building industry where this is being used solely to avoid the cost of providing workers with insurance protection; and the further measures, if any, he has taken to protect the revenue base and the employment rights of such workers. [3395/98]
Minister for Finance (Mr. McCreevy) Charlie McCreevy
Minister for Finance (Mr. McCreevy): I am informed by the Revenue Commissioners that persons employed in the construction industry are classified for tax purposes as employees or as sub-contractors.
Revenue cannot dictate the terms under which workers are engaged in any industry. The increasing drift towards self-employment in the industry mirrors the world-wide trend towards contracting out and reflects the increased flexibility of work practices.
Sub-contracting is an integral part of the construction industry. Payments to sub-contractors come within the relevant contracts tax —RCT — system commonly referred to as the C2 or C45 system. Under this system, where a principal contractor makes a payment to an unregistered contractor, he or she is required to deduct relevant contracts tax from those payments at the rate of 35 per cent.
Revenue has issued guidelines to the industry setting out the criteria under which a person may be regarded as an employee as distinct from a sub-contractor. Principal contractors and sub-contractors creating self-employment contractual arrangements must sign a declaration to the effect that these guidelines have been considered by them and they are both satisfied that the contract created is a contract of self-employment. However, if it emerges as a result of an investigation that an employment, rather than a sub-contract, exists and PAYE-PRSI and levies are not being deducted, the principal becomes liable for the PAYE-PRSI and levies.
Revenue have advised me that they are currently engaged in a nationwide campaign to ensure that declarations made by principal contractors  and sub-contractors represent the true situation. The programme is focused on detecting failure by employers to operate PAYE-PRSI and levies from employees and to make the appropriate employers' contribution to PRSI. The campaign includes site visits and entails an examination of the declarations by reference to the particular circumstances of the person employed. Where the sub-contractor status is considered to be inconsistent with the terms of employment the principal is being asked to deduct PAYE-PRSI and levies.
The campaign commenced in Dublin in November 1997 and has recently been extended to country districts. The results at this stage from the Dublin project indicate that 74 per cent of the cases examined were correctly designated as sub-contractors, leaving 26 per cent to be re-classified as employees. Resistence to re-classification has been met from some principals. Each such principal can have the Revenue official's decision on re-classification reviewed internally in Revenue and has a statutory right of appeal to the Appeal Commissioners. Revenue intend to visit every principal contractor not only to ensure compliance with the PAYE-PRSI and levies system, but also to ensure an even-handed approach to its campaign.
In addition to this special campaign, Revenue and the Department of Social, Community and Family Affairs regularly conduct joint investigations in the construction industry through the joint investigation programme to ensure those engaged as employees fully comply with the tax system and to protect the employment rights of employees.
Dáil Éireann 486 Written Answers. Contract Workers.