Compliance: Not paying tax is seen as a way of gaining competitive advantage in the construction industry, according to chairman of the Revenue Commissioners Frank Daly.
Surveillance on a number of major infrastructural projects in the State by the Revenue has led to cases being selected for possible prosecution, he said.
The Revenue "faces new challenges arising from the increased level of activity in the construction sector and the increase in the number of non-resident contractors", Mr Daly told Comptroller and Auditor General (C&AG) John Purcell, according to Mr Purcell's annual report for 2004, which was published yesterday.
Figures in the report show that the number of registered and unregistered sub-contractors has jumped to 96,900 this year from a total of 63,000 in 2000. The Relevant Contracts Tax (RCT), a 35 per cent retention tax for unregistered subcontractors, was introduced in an attempt to secure payment of tax by subcontractors who might not otherwise do so, the report states.
However, Mr Daly says the serious compliance problems in the construction sector that RCT was introduced to tackle still exist.
Twelve cases of RCT fraud were investigated in recent years. Two involved collusion among large numbers of companies and individuals.
In one case the number was 97 while in another it was 24. Garda inquiries are continuing, according to the report of the C&AG.
The remaining 10 cases of suspected serious RCT abuse were referred to the Revenue's prosecution section. One resulted in a conviction. In two the defendants did not appear in court, and bench warrants were issued.
"The difficulties in tackling non-compliance in the construction sector are recognised internationally, and different jurisdictions have come up with their own responses to the problem," Mr Daly is quoted as saying in the report.
Mr Purcell's report also looks at the issue of the collection of stamp duty on electronic share transactions.
Shares sold under the electronic Crest system are subject to the tax, and a system is in place for its collection. However, some brokers have been found to have availed of exemptions to which they were not entitled, according to the report.
In one case a broker made an unsolicited payment of €1.1 million to the Revenue in respect of 516 share transactions on which stamp duty had not been paid.
The Revenue "informed the broker that a further €3.3 million comprising interest of €100,000 and penalties of €3.2 million was due". Following correspondence the penalties were reduced to €281,443.
Mr Daly told Mr Purcell that the existing Crest computer system was being upgraded and that a number of brokers were being audited.
On the Special Savings Incentive Account Scheme, Mr Purcell said the takeup of the scheme broadly reflected the distribution of taxpayers' incomes as reported to the Revenue.
The scheme was introduced by former minister for finance Charlie McCreevy, who said it was designed to encourage people to save, and to take money out of the economy. Mr Purcell said the gross amount involved was too small to have any measurable effect on inflation.
On the Revenue's audit programme the report states that 1,690 comprehensive audits were carried out in 2004 on people identified as connected with bogus non-resident accounts. This compared with 2,460 in 2003.
