President Barack Obama ordered the Treasury Department, the Office of Management and Budget, and other federal agencies to block contractors who are seriously delinquent in their taxes from receiving new government contracts.

Obama also directed the IRS to conduct a review of the overall accuracy of companies’ claims about tax delinquency. In addition, the president called on Congress to approve legislation to allow the IRS to crack down on corporate tax cheats, and to allow data sharing between the IRS and contracting officials at agencies to ensure that corporate scofflaws do not exploit loopholes to continue to win federal contracts.

Obama pointed out that studies by the Government Accountability Office have identified tens of thousands of such “dead-beat companies” that are being awarded government contracts.

“One company owner who owed over $1 million in taxes was paid over $1 million as a defense contractor, and instead of using that money to pay his back taxes, he chose to buy a boat, some cars, and a home abroad with his earnings,” said Obama. “The total amount owed in unpaid taxes by companies like that is estimated at more than $5 billion. Now, in Washington, $5 billion might not seem like a lot of money. But if we were to invest that money in education, it would be enough to cover the cost of annual college tuition for more than half a million students.”

At least one observer believes Obama needs to take a broader approach. Dean Zerbe, alliantgroup’s national managing director in Washington, D.C., and a former tax counsel and senior counsel on the Senate Finance Committee, said that enforcement needs to be balanced with taxpayer rights for small and midsized businesses and with better service.

“I appreciate the president’s call for tax enforcement, but I am greatly concerned that any crackdown on tax cheats needs to be coupled with strong improvements in IRS service and better protection of taxpayer rights,” he said.

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