Revenue collects €27m in taxes relating to misclassification of workers as self-employed

Voluntary disclosure process opened last September

Disclosure process was put in place by Revenue last September, with a deadline of January 30, following the publication of an updated code of practice on determining employment status by the Department of Social Protection. Picture: Laura Hutton

The Revenue Commissioners have collected €27m in taxes relating to the misclassification of workers as self-employed since the opening of a voluntary disclosure process last year.

Revenue chair Niall Cody is set to tell the Public Accounts Committee (PAC) on Thursday that 280 submissions were made via the process relating to more than 6,600 employees, with “gross tax adjustments of €26.7m” processed as a result.

The disclosure process was put in place by Revenue last September, with a deadline of January 30, following the publication of an updated code of practice on determining employment status by the Department of Social Protection.

Mr Cody will tell the committee that while the “tax risks associated with misclassification are not new”, the Supreme Court’s Karshan judgement of October 2023 means that “the landscape has changed for businesses”.

Karshan, otherwise known as the Domino’s Pizza drivers case, saw the court rule in favour of Revenue, which asserted that those workers were full employees of the company as opposed to self-employed contractors.

The case was the most significant in Irish legal history in terms of the bogus self-employed — people doing the same work as full-time employees of an employer but without any of the benefits like holiday and sick pay and pension contributions.

Bogus self-employment traditionally affects many sectors, notably construction and media. 

Estimates of the financial impact of on the economy vary, though some sources have speculated that hundreds of millions of euros in uncollected taxes are lost each year.

Thursday’s hearing will see both Revenue and the Department of Social Protection giving testimony on a report by the comptroller and auditor general last September concerning the collection of social insurance contributions, the tax primarily used to fund welfare programmes.

Addressing the committee, secretary general of the department John McKeon will reiterate Comptroller Seamus McCarthy’s point, made in his report, that it is “difficult to estimate the level of misclassification” of workers in Ireland, given the difficulty in reconciling “the data from various sources related to levels of self-employment".