Oireachtas to discuss black economy in the construction sector

The CIF will appear before an Oireachtas Committee today Tuesday 21st May to discuss the issue of the black economy in the construction sector.  The CIF will outline examples of black economy activity in the sector involving construction work that is not tax compliant or is being carried out by individuals who are receiving social welfare benefits.  

The issue of the black economy in the construction sector will be discussed during at meeting of the Joint Oireachtas Committee on Jobs, Enterprise and Innovation on Tuesday 21st May at 1.30pm.

Speaking ahead of the presentation, CIF Director General Tom Parlon said, “With the construction sector going through such difficult times, the competition for any work that is available is fierce.  Companies need to secure work to stay afloat.  Tender prices in the industry are being forced lower and lower as construction companies do everything they can to ensure they secure a project.  In an environment where there is a race to the lowest possible tender price, then some people start looking at ways in which they can gain an edge on their competition.

“There is considerable belief in the construction industry that there are a number of construction companies and single construction operatives who are turning to the black economy to gain that competitive edge.

“The most obvious examples of this type of activity involve 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.

“The CIF believes that 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,” Mr. Parlon concluded.