Ombudsman condemns 'phoenix'-type companies

PENSIONS OMBUDSMAN Paul Kenny has spoken out against abuse of tax law and other unethical business practices by “phoenix”-type construction companies.

Mr Kenny said his office had found evidence in the construction sector of a number of “phoenix” companies, which are businesses that have been restarted in a new guise by individuals who had previously wound up companies to avoid tax and other liabilities.

Four such companies had come to his attention in the past week, during the course of his investigations into pensions compliance. The company owners had “walked away leaving a trail of debt”, including unpaid taxes and PRSI, unpaid pension contributions, unpaid subcontractors, unpaid suppliers and unpaid wages.

“In many cases the controlling directors are back in business in a matter of days, often from the same premises, sometimes employing the same construction workers, and finishing contracts that were the obligation of the old company,” he said in a statement.

“While technically this may not be illegal, clearly there is an issue of morality, compliance with corporate governance and the potential theft in cases where pension contributions were deducted from workers’ wage packets and not remitted.”

The Construction Industry Federation (CIF) said the abuse cited by the Pensions Ombudsman was symptomatic of a wider problem, given the “rampant” black economy in construction, particularly in the domestic repair, maintenance and extension sector. It blamed what it said was the failure of State agencies to protect both legitimate employers and the tax income received by the exchequer.

“The indirect costs are even more significant in terms of legitimate tax-paying companies going into receivership and the loss of real employment in the sector,” said CIF director general Tom Parlon. “Where black economy activity takes place, it cannot happen without the complicity of the homeowner.”