The Revenue Commissioners are to launch a major offensive against tax evasion by the construction industry following fears that tens of millions are being lost to the Exchequer, writes Mark Hennessy, Political Correspondent
One quarter of all of Revenue's audit inspections is to be focused on the booming sector, which is increasingly difficult to inspect because of the growth in the use of sub-contractors.
Following a review by its management advisory committee, Revenue has drawn up new rules to "greatly enhance our ability to deal with the perceived risks", Revenue chairman Frank Daly said in a letter to Labour TD Joan Burton.
There will be a big increase in the number of site visits, including surveillance of vehicles entering and leaving, while projects deemed to be "at risk" by Revenue inspectors are to be subject to special attention.
Information about the number of sub-contractors in the industry, who are supposed to have 35 per cent of their fees deducted at source and sent to Revenue, is to be gathered electronically for the first time in the coming months.
Following a 1998 examination, Revenue found that 12,000 tradesmen out of 60,000 examined were fraudulently listed as sub-contractors rather than PAYE employees.
The number of C2-registered sub-contractors in the industry has jumped sharply over the last five years from 27,000 to 40,000, while the number of unregistered sub-contractors has risen even more from 36,000 to 56,000.
Builders are doing everything possible to avoid hiring workers directly, said Ms Burton, thus avoiding the need for them to pay social insurance and pension contributions. The Revenue Commissioners award C2 forms to those who can show they are proper sub-contractors rather than employees trying to escape paying PAYE, and that their tax affairs are in order.
In some cases builders issue false Revenue deduction certificates to sub-contractors who do not exist for work that was never done, thus evading tax on 35 per cent of the sum in question.
The difficulties surrounding the collection of the 35 per cent tax are "compounded by the highly-competitive nature of the industry where non-payment of tax debts is seen by some as a way to gain a competitive advantage", said the Comptroller and Auditor General.
The number of full on-site inspections undertaken by Revenue inspectors dropped substantially in 2002 and 2003 because they did not have Safepass health and safety training.
Comptroller and Auditor General John Purcell said recently that inspectors have now been provided with Safepass training, allowing them fully on sites rather than ensuring that they stop at the site office.
Last year Revenue finished 439 audits focusing on the relevant contracts tax on building firms.
It collected €6.98 million in back taxes in the process, including 15 settlements over €100,000.