WASHINGTON — One in 10 companies contracting with the General Services Administration owes unpaid federal taxes — a total of $1.4 billion — congressional investigators say.
Neither federal law nor the agency's policies require government officials to consider a company's tax debt when awarding a government contract, the Government Accountability Office said.
The investigators studied the GSA contracting practices for a hearing today of the Senate Homeland Security and Governmental Affairs investigations subcommittee. The panel released the report Monday.
"It is simply unacceptable that tax cheats who owe the government millions in back taxes get millions of dollars from American taxpayers," said subcommittee chairman Sen. Norm Coleman, R-Minn.
The GAO discovered evidence of abusive or potential criminal activity among 25 contractors who diverted payroll taxes for personal or business use. Failure to transfer payroll taxes withheld from paychecks to the government is a felony.
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Despite owing from $100,000 to more than $9 million to the government, the owners and officers of some companies had substantial personal assets, including homes worth more than $1 million and luxury vehicles.
A security services company, which got at least $1 million in contract payments, owed $9 million. The owner withdrew large sums for personal use and spent $100,000 gambling.
A human resource services company got at least $100,000 in contract payments while it owed more than $400,000. The owner has multiple properties and several luxury vehicles and made multiple large cash withdrawals at casinos. The company obtained a contract for hurricane relief efforts.
The GAO examined contracts used from October 2003 through June 2005. About 85 percent of the taxes owed were corporate income and payroll taxes.
The investigators said their $1.4 billion figure probably underestimates the amount owed because, in part, they did not examine contractors that failed to file tax returns or underreported their income.
