Warning on black economy in construction

A GROWING black economy in the building business could end up costing the exchequer an estimated €250 million a year in lost taxes and social insurance contributions.

The Construction Industry Federation (CIF) looks set to lobby the Government to tighten regulations to ensure contractors who are not paying tax and social insurance are squeezed out of the business.

There is growing concern within the industry that a number of operators are cutting corners on tax compliance, making it harder for those who work within the law to compete for contracts.

Much of the black economy work is on smaller projects and one-off housing.

A CIF spokesman said yesterday that the value of contracts involved was about €1 billion a year.

He said the Government was losing 25 per cent, or €250 million, of this in unpaid taxes.

The Master Builders and Contractors Association (MBCA), one of the CIF’s main divisions, has written to the organisation’s executive calling on it to ask the Government to tighten the law.

CIF director Tom Parlon said yesterday that the organisation’s executive would almost certainly make tackling the industry’s black economy part of its official policy, adding that it was likely to begin lobbying the Government.

The MBCA says it should be mandatory to inform the Revenue Commissioners of any contract worth €3,000 or more; grants and other incentives should only be paid to compliant operators; tax assessment and reliefs should be contingent on firms providing full certificates of building costs; and owners who reclaim VAT for carrying out their own work should produce VAT invoices from suppliers and contractors.

Meanwhile, the building slump continued in January, although the rate of decline eased to its slowest in five months, the latest Ulster Bank Construction Purchasing Managers’ Index shows.

The bank’s index rose from 33.1 in December to 36.1 in January, its highest level since August.

Any rating below 50 indicates a decline in activity.

Despite the slower rate of contraction, Ulster Bank said the data still indicated a substantial fall in activity during the month as conditions remained “fragile”.

Activity in the building sector has decreased for 31 consecutive months since June 2007.

The survey showed that the contraction in new business at Irish construction firms eased in January to its slowest rate of decline since October 2007.

However, the decline in new orders – for the 34th month – was still substantial, with firms reporting a lack of available tenders, the survey said.

The steepest rate of decline was in the civil engineering sector, with activity on these projects falling for the 26th consecutive month.