The CIF has published a range of proposals aimed at clamping down on the black economy in the construction sector. The proposals were outlined during an Oireachtas Committee meeting which looked at how the black economy is damaging legitimate operators in the construction industry.
· All construction clients should advise the Revenue of the commencement and identification of contractors employed for any construction project over a certain value.
· Payment of buildings grants if any and other incentives should be made conditional on the work being carried out by tax compliant contractors.
· A mandatory site notice displaying names of client, contractor(s), professionals, and planning reference numbers for all projects over a certain size should apply.
· Tax assessment and relief should be made contingent on the provision of a certificate of building costs, which would identify all relevant building contractors.
· Revenue should review all commencement notices lodged with building control authorities to ascertain location/scale of construction activity and monitor who is undertaking the construction work.
· The banking system should be obliged to notify Revenue of all significant cash withdrawals/ loan draw downs processed so that Revenue can then investigate who has been paid for work undertaken.
· In relation to fuel laundering, a mechanism should be prescribed whereby all diesel fuel would carry the same duty levels at point of sale so that compliant trade users can recover VAT in the normal course of business.
· Provide a facility to enable homeowners reclaim the VAT incurred on costs associated with the renovation and upgrade of their principal private residence.
· Provide a facility whereby taxpayers could have their personal tax allowance increased by a proportion of the construction costs incurred in the renovation and upgrade of their principal private residence where registered contractor(s) who provide their tax reference numbers are engaged.
· An information campaign should be undertaken by government similar to the Insurance Fraud Campaign to assist in stamping out shadow economy activities.
· Where a private individual / entity is to engage a company or individual to undertake construction related work on their home or other structure, private individuals / other entities should be obliged to check if the construction company or person undertaking the works has a valid C2 for works above a certain figure, and to notify Revenue accordingly.
The CIF believes that these measures will help reduce black economy activity in the construction sector.
“We need to see action taken to reduce the level of black economy activity in our industry which is damaging legitimate operators and is prolonging the problems facing the whole sector,” said CIF Director General Tom Parlon. “The CIF believes measures to stamp out black economy activity in the construction sector should be introduced. In the current economic climate it is important that all construction companies and sole traders act responsibly and comply with all the legal obligations. No one should be avoiding their taxation requirements or misusing social welfare payments.
“There is considerable belief in the construction industry that some construction companies and single construction operatives are turning to the black economy to gain a competitive edge. This involves construction work that is not tax compliant and/ or carried out by individuals who are receiving social welfare benefits for jobseekers simultaneously.
“Unfortunately there is a lot of anecdotal evidence to suggest that some construction companies and construction operatives are not fully meeting their tax obligations. On certain jobs, there is a belief that the VAT is not being charged to clients. There is also a belief that in some cases the taxes are being applied to the project client but once this has been paid to the construction operator the relevant payments are not being passed on to Revenue.
“There is also a belief among construction companies that some of their competitors are paying their workers in cash outside of the tax system. These various examples of black economy activity are sometimes used to subsidize the work that is being carried out, allowing the construction operative or construction company to provide a lower tender price.
“The misuse of social welfare payments is also a serious problem for the construction sector. A large portion of construction employment is temporary in nature. Construction workers may be employed only for the duration of a particular project. In some cases this can be for long term projects, but in other cases it might only be for a few weeks or days.
“The anecdotal evidence would suggest that certain construction operatives are claiming Jobseekers Allowance while still securing work on the side, which they are not declaring. The Jobseekers Allowance payment provides a subsidy to the construction operative.
“As they are topping up their income through other means it provides them with a greater margin for the project which enables them to offer a lower tender when they are competing for work.
“It has also been suggested that some construction companies are encouraging workers to make use of the Jobseekers Allowance payments. These workers might receive a cash payment for the work they carry out for the construction company while at the same time receiving the full Jobseekers Allowance payment. The work is kept off the books, making it more difficult to follow any paper trail and stop this practice. As the workers are receiving the Jobseekers Allowance the construction company does not have to provide as large a wage as might otherwise be expected – effectively they are using the social welfare system to subsidise their wage expenditure.
“This method also allows construction companies and construction operatives to avoid their PRSI and other regulatory obligations.
“We want to see a compliant, healthy construction industry. We believe that these proposals, if implemented would help make that a reality,” Mr. Parlon concluded.