Red Light, Green Light could show good, bad guys

Now that the 3-percent withholding tax is off the books, Congress is requiring government officials to look for an alternative. But experts are pessimistic about the future. They fear a complicated, costly and detrimental replacement is likely in an effort to keep contractors complying with their taxes, as the withholding tax attempted to do.

There's a simple approach though to weed out the tax-delinquent contractors.

When considering a business for award, contracting officers would have a database displaying a red or green light for each company. It would show whether a company is compliant with taxes and other laws.

If the light is red, stop. Do not award that company the contract.

If the light is green, go ahead with the contract award. It means the company is up to date with its taxes.

Why lights?

A company’s tax data is legally protected, but a red light or a green light could give contracting officers notice of whether a company is worthy as a business partner.

It would be a display of information without exposing protected details, said Trey Hodgkins, senior vice president for national security and procurement policy at TechAmerica.

When officials found a broad attempt to withhold payment from all contractors several years ago, Hodgkins said, Congress passed enhanced certification requirements for contractors to validate their compliance with tax obligations, and the Federal Acquisition Regulatory Council circulated a new rule.

Can the government use that requirement to meet its own needs? More so, would government officials tap that resource?

There’s another resource too: The IRS could use an old authority in the Federal Acquisition Regulation: Suspend or even debar a company, Hodgkins said.

“The authority is not used much, but we in industry are at a loss how you can further enhance the ability of the government to keep tax-delinquent contractors from receiving awards other than the ultimate sanction of debarment,” he said.

As for what’s possibly ahead for the withholding tax’s replacement, an FCW commented that it won’t be business-friendly, whatever it is.

“Because too many in Congress as well as the upper levels of government have never had to run a business, they have no clue just how destructive their rules and other regulations are to business as well as how much they hurt their budget—and ultimately the taxpayers,” the reader wrote in commenting on our previous report.

Posted by Matthew Weigelt on Jan 13, 2012 at 1:32 PM