Revenue Commissioner's Construction Industry Plan - May 2006
Importance of the Sector
There is no doubt about the importance of the Construction Industry in terms of the National Economy. It accounted for €30bn or nearly a quarter of the Gross National Product in 2004. The net contribution to the Exchequer by way of Taxes and Levies is about €10 billion per annum. With 300,000 people engaged in construction, it accounts for nearly 12% of total employment.
Why has Revenue decided to launch a national project for the sector?
Revenue has always maintained a significant presence in monitoring activities in the construction sector. It would be wrong to suggest that Revenue has only just become aware of the sector and is only now putting resources into testing the compliance of the sector. We have always been involved in an ongoing programme of construction related audits, compliance interventions, site visits and so on and these programmes would have continued.
Developers, contractors and operators in construction operate on a national basis, if not on an international basis. The workforce is now highly mobile and this mobility has caused problems in ensuring that all of the activities of an operator are properly compliant from a Revenue perspective.
There are a significant number of taxation, compliance and customer service issues for those engaged in construction and some of these are dealt with below. These are further complicated by the large number of non-nationals now engaged in the sector. These issues are common to each of the Revenue geographic regions and thus a national approach appears the best approach.
Given the growth in the industry over the last number of years, concern has been expressed that maybe Revenue could be more proactive in monitoring the sector. These concerns were particularly enunciated in the recent deliberations of the Public Accounts Committee on a report carried out by the Comptroller and Auditor General on Revenue's approach to the sector. In addressing those concerns the Chairman of Revenue, Frank Daly, gave a commitment to increase the Revenue resources devoted to managing compliance in the sector. The commitment given was that 25% of the audit and compliance resources in 2006 would be devoted to the sector. The decision was made to manage the project on a national basis to make best use of these resources.
What are the highlights of the national plan?
In addition to the 25% resource commitment, the key points of the 2006 plan, in no particular order, include:
- A national C2 monitoring group has been set up. This is made up of staff from each of the 4 Revenue Regions who are operating on a full time basis monitoring suspect cases and sharing and disseminating intelligence.
- The compliance control for all non-resident contractors has been centralised in a single location. This unit is based in the Dublin City Centre District. So, no matter where the building work is located, the compliance associated with a non-resident contractor will be managed from Dublin City Centre District with local staff to assist in any interventions where considered necessary.
- Improved technological advances will support all our activities including better identification of cases posing a risk and cross checking of all data submitted to Revenue.
- The Collector General's Office will concentrate on improving compliance for RCT 35s (annual return) and RCT 30s (monthly return). Greater use will be made of Revenue's enhanced IT capability to improve their effectiveness in managing debt.
- There are a number of changes to the legislation governing the administration of Relevant Contracts Tax (RCT) in the Finance Act, 2006 which are aimed at tightening control and discouraging fraud.
- The taxes we will be concentrating on are any taxes or duties associated with the sector, fiduciary taxes and direct taxes. In terms of audit activity you can expect RCT and VAT to be combined in many of the audits. All audits will take place under the terms of the Code of Practice and audit letters will be issued.
- More site visits will be carried out by Revenue and many of these will be in conjunction with other state agencies or Government Departments and Regulatory bodies. [These agencies will only be involved where it is considered appropriate.] Specific attention will be placed on ensuring that all RCT obligations are being followed including the correct classification of all workers on the site as either self-employed subcontractors or employees. Visits will include unannounced visits, visits where uniformed Revenue staff will be used; simultaneous site visits on specifically selected active sites and "high visibility" visits which will include visits to large sites by cross District teams to carry out multiple enquiries - Principals, C2 holders, employees' PPSNs, fuel testing etc.
- There will be a global focus on the construction industry. It's not just about RCT but will also include the ancillary activities associated with the industry. This will include construction, project management, architects, property developers, infrastructure projects, supply chain of goods and services, civil engineering etc.
- We will monitor all new C2 holders within 6 months of getting the C2 certificate and visit them where it is considered appropriate.
- We will identify suitable cases for investigation with a view to prosecution particularly in the areas of cases using false documentation.
- From a customer service perspective, we will commit to keeping RCT material as up to date as possible on the website www.revenue.ie and also to display it in a number of different languages to reflect the changing nature of the workforce involved in construction. Changes being made to the site specifically for the construction project will make it easier for people to locate all the up to date information.
- We will endeavour to improve the turn around time for issuing C2 certificates and Forms RCT 47 where all the relevant documentation has been submitted and conditions have been met.
Subsequent articles on the construction project this year will include details of the legislative changes for 2006, a reminder of the taxation regulations for principal and sub contractors, what to expect from a site visit and other topics.