Administration to toughen accountability on contractors' taxes

By Ed O'Keefe
Washington Post Staff Writer
Thursday, January 21, 2010

The Obama administration announced Wednesday that it plans to crack down on federal contractors who fail to pay their taxes.

An executive order signed by President Obama directs the Treasury Department and the Office of Management and Budget to block delinquent contractors from receiving new work from federal agencies. The Internal Revenue Service will also review the accuracy of contractors' tax returns to ensure truthful reporting.

Obama called the steps "basic common sense," but said they alone will not eliminate all instances of contractor abuse.

"It is simply wrong for companies to take taxpayer dollars and not be taxpayers themselves," Obama said. "We need to insist on the same sense of responsibility in Washington that so many of you strive to uphold in your own lives, in your own families, and in your own businesses."

Obama cited Government Accountability Office reports of thousands of contracting companies that have received government work despite owing billions of dollars in federal taxes. A 2007 GAO study found that several contracting company owners counted expensive boats, cars, jewelry and multimillion-dollar properties among their assets, despite billions of dollars in unpaid taxes.

Wednesday's announcement is the latest step to reduce contracting waste, fraud and abuse. Federal agencies have saved roughly $19 billion in government contracting costs during the fiscal year that began in October, almost halfway to a two-year, $40 billion goal set by Obama last spring. OMB has also instructed agencies to slash spending on "high-risk," noncompetitive contracts by 10 percent this fiscal year. The administration is expected to issue long-anticipated guidance on "inherently governmental tasks" that can no longer be performed by contractors.

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