3% Contractor Tax Affects Both Side of the Table

Government Executive magazine’s recent article states:
Contractor tax provision forces agencies to change financial systems

A provision in a tax law passed last year would require agencies to revamp financial management systems unless federal contractors are successful in convincing Congress to repeal the provision. Section 511 of the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) requires federal, state and local government agencies to begin in 2011 withholding a tax of 3 percent of all payments of $100 million or more to government contractors. The 3 percent withholding would raise an estimated $7 billion between 2011 and 2015. Congress added the provision to the law to make it more difficult for contractors to avoid paying income taxes, said Chris Braddock, director of procurement policy at the U.S. Chamber of Commerce's economic policy division.

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