Revenue could collect almost €27 million in taxes following a Supreme Court ruling that found food delivery drivers were staff and not self-employed, politicians will hear on Thursday.
In a landmark ruling on the gig economy in October 2023, the court found that drivers working for Karshan (Midlands) Ltd, trading as Domino’s Pizza, were employees for tax purposes, not independent contractors.
Revenue has identified €26.7 million in taxes due from businesses which misclassified more than 6,600 employees as contractors before the ruling, its chairman, Niall Cody, will tell the Dáil’s Committee on Public Accounts.
Last September, Revenue announced a voluntary disclosure scheme for employers who, acting in good faith before the court ruling, wrongly classed employees as contractors.
READ MORE
According to Cody’s statement to the committee, employers had made more than 280 submissions by the deadline for disclosure on January 30th.
Cody cautions that the Karshan ruling does not just apply to delivery drivers, but is “relevant across all sectors”.
“The disclosure opportunity has shown that businesses have now recognised that the Karshan judgment has changed the environment in which they operate,” he adds.
The Karshan case clarified legal questions raised by the growth of the so-called gig economy, which treated workers including fast food delivery drivers as self-employed.
Increased use of apps to order home deliveries drove the growth in casual employment.
According to Cody, the ruling gives a “five-step framework” that allows businesses determine whether workers are employed or self-employed.
The Revenue chairman argues that it has changed the landscape for employers across many industries.
The risk that businesses will wrongly classify workers as self-employed is not new, he adds.
Revenue targets this in several ways, including visits to builders, couriers and delivery services, Cody says.
Businesses are not generally liable for tax if workers are genuinely self-employed, but must deduct and pay income tax and social insurance on employees’ behalf.
How the conflict in the Middle East is already affecting Irish consumers
Increasing social insurance rates for self-employed people to bring them in line with what employees pay would cut financial incentives to wrongly classify workers, John McKeon, secretary general of the Department of Social Protection, will tell the committee.
His statement to the committee notes that the Government’s Tax Strategy Group recommended this in its 2020 report, while adding that the Republic is unusual in not charging both groups the same rates.
McKeon says that wrongly classifying workers as self-employed is not as widespread as thought, but adds that the practice still deprives the State of revenues and undermines confidence in the system.
His department has a unit with 19 staff to investigate such cases. Employers are liable for full payment of arrears if they have been misclassifying staff, he says.
