About 10 percent of General Service Administration contractors owed roughly $1.4 billion in unpaid taxes between the years 2004-05,according to an investigation conducted by the Government Accountability Office.

According to reports, the GAO found that throughout the 2004 fiscal year and through nearly the first three quarters of fiscal 2005, thousands of GSA contractors abused the federal tax system.

The auditor general's review of some 25 contractor cases stated that the scofflaws had either kept employees' payroll taxes, or funded their enterprises by using employee withholding wages.

"Most federal contractors provide valuable goods or services, and do so while paying the taxes they owe. Other contractors stuff taxpayer dollars in their pockets with one hand, while stiffing Uncle Sam with the other," said Sen. Carl Levin, D-Mich.

Compounding the egregious tax dodge, the GAO report said the contractors with tax debts were able to win bids as a result of lower costs.


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