Provision in the IRS reform bill would close down off-shore tax havens
used by the largest contractor in Iraq to avoid millions in payroll
taxes
Washington,
DC – The House of Representatives
this week passed a pair of important and practical tax-time reforms of the
federal contracting process backed by US PIRG. The House voted on Tuesday to
close the loophole used by defense contractors, including Kellogg, Brown, and
Root, to avoid payroll taxes by hiring workers through foreign shell companies.
On Monday, the chamber overwhelmingly backed a measure to ensure that major federal contracts go to
businesses and organizations that obey tax laws.
US PIRG sent a series of over 150,000 emails and organized a
coalition of DC-based government watchdog groups to galvanize support and
ensure passage of the two bills.
“Americans are working hard and paying their fair share,”
said USPIRG staff attorney John Krieger, “and we expect corporations that
receive millions, or even billions, from the federal government to do the
same.”
Last month, the Boston Globe
reported that Kellog, Brown, and Root, which receives an estimated $16 billion
a year for defense contracts in Iraq,
avoids close to $100 million a year in payroll taxes by hiring workers through
foreign shell companies.
A provision in the Taxpayer Assistance and Simplification
Act amends the Internal Revenue Code and the Social Security Act to treat
foreign subsidiaries of U.S.
companies contracting with the United
States government as American employers for
the purpose of Social Security and Medicare payroll taxes. The bill passed the House by a 239 to 117
margin.
A day before, The House passed The Contracting and Tax
Accountability Act, which requires companies and organizations applying for
major federal contracts to certify that they do not owe delinquent taxes. The
Government Accountability Office reported last April that thousands of private
companies obtained large government contracts despite proven histories of tax
delinquency and fraud. This costs the
government over $5 billion a year and puts honest companies at a disadvantage
in competitive bids because their operating costs include tax compliance.
“This
Congress was elected on promises of accountability, transparency, and good
governance, and sifting out tax-dodging contractors is a good step toward
proving those promises were not hollow,” said Krieger. “We look now to the Senate to quickly
consider and pass these important reforms.”
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U.S. PIRG is the federation of state Public
Interest Research Groups. PIRGs are non-profit, non-partisan statewide
citizen-based public interest advocacy groups.
