Washington -- More than 27,000 defense contractors paid by the Department of Defense in fiscal 2002 owed more than $3 billion in unpaid taxes, according to a report from the General Accounting Office.

In its study, the auditor general said the Defense Department had failed to implement the seven-year-old Debt Collection Improvement Act, designed to help reclaim back taxes from defense contractors. The GAO argued that the “inconsistent participation” by the DOD in that strategy resulted in just $687,000 being collected from delinquent contractors as of Sept. 30, 2003.

The agency maintained that had the Defense Department deployed the proper procedures, its collections could have been roughly $100 million on an annual basis.

In addition, the GAO unveiled “abusive” tax activity via an audit of 47 contractors, some of which were found to have delinquent payroll taxes dating back to the early 1990s. The GAO presented its findings before a Feb. 12 Senate Governmental Affairs Subcommittee hearing.

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