'Bogus Self-Employment' Costs Taxpayer €600m

A new report from the Irish Congress of Trade Unions (ICTU) has said the Irish State could have lost more than €600 million since 2007, due to an increase in "bogus self-employment" within the construction industry.

The report, False Economy: The Growth of Bogus Self-Employment in the Construction Industry, examines the growth within the sector and the possible loss to the state and taxpayer of up to €80m per annum, since 2007.

Bogus self-employment is defined as the deliberate misclassification of workers as "self-employed" to ensure major contractors save money on social insurance payments. Further losses arise from workers without social insurance coverage being forced to rely on social protection payments and from possible fraud in public contract pricing.

Fergus Whelan, author of the report, said the losses stem directly from a lack of adequate risk control. He explained: "In 2007, unions, employers and Revenue agreed a Code of Practice to tackle bogus self-employment, but the numbers shot up after that date, strongly suggesting the code is not being adhered to.

"In 2012, Revenue changed from a paper based application system for contractors, to an online system. A number of controls were lost with the move online and the numbers have since risen further."

The report found that every bogus self-employed worker means an annual loss to the State of €2,886 in PRSI payments.

Currently, figures reveal some 27,600 sole traders are operating in construction – with no adequate controls to ensure all are legitimate. If all are bogus, this is said to equate to a loss of almost €80m per annum, and close to €640m since the Code was agreed in 2007.

Mr Whelan concluded: "Everybody – bar a few contractors – loses in this: workers lose employment protections and social insurance cover, the industry sees an erosion of standards and the State and citizens are deprived of substantial revenue."

(JP/LM)