DOES a black economy exist within the island’s construction industry?
That was the question raised in the House of Keys by Michael MHK Alfred Cannan who said firms working cash in hand were depriving government coffers and undermining legitimate companies that did pay their taxes.
He said: ‘Undeclared tax receipts are both detrimental to Treasury income but also, just as importantly, not creating a level playing field for those companies that to abide with the law.’
And he said as the economy tightens, there may ben increased temptations for some firms to avoid paying tax.
Treasury Minister Eddie Teare MHK said he had not received any evidence of a black economy existing within the construction industry.
But he said that both the Income Tax Division and Customs and Excise had a team of highly trained compliance officers who worked with enforcement agencies across government to ensure construction work is under taken legitimately.
He revealed that the Income Tax Division had concluded 37 compliance cases in the past two years relating directly to the construction industry, uncovering extra income of £2 million and generating £397,000 of tax.
And he repeated the message he gave in his Budget speech: ‘If anyone thinks that they can get away without paying tax on their income, they should think again.
‘If you have income which you do not declare, it is only a matter of time until we catch up with you and there will be severe repercussions and stringent penalties. There is no hiding place.’
John Houghton (Douglas North) suggested that many contractors employed by government departments were not themselves paying their sub-contractors on many occasions. ‘What action will he taken to put an end to this?’ he asked the Treasury Minister.
Mr Teare replied that Treasury did take a close interest in this and would take it into account when main contracts were awarded.
He said that some companies would question the timing and quality of sub-contractors’ work as a means of trying to defer payment.
Bill Henderson (Douglas North) said there was a potential for the manipulation of the tax system. The minister said it was ‘virtually impossible’ to identify the scale of lost income through this element of the black economy but ‘through strong enforcement we are increasing the tax take’.
