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Tom Bohn, Institute of Financial Operations CEO, argues contractors withholding tax will drive small business out of the bidding process.
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The IRS held a hearing this morning to discuss -- new 3% withholding tax on government contractors.
Joining me now is used to financial operations CEO Tom bond Tom what was the IRS so we do accomplish if -- -- no with this hearing this morning.
Well Chris thank you for having me that you know the institute -- financial operations.
We like to call these types of things.
Just avoided the 1099 debacle last year this is yet another way to try to find this incremental revenue to really.
-- them avoid taking on the tough issue which is balancing our revenue and expenses in the just not doing it yes.
Now you're essentially here -- new -- department of defense and added potter -- obviously has thousands and thousand contractors.
Your -- and 97%.
Of what the the ultimate the winning -- was for that contract and then.
The Department of Defense is sending that additional 3% to the treasury every year every month.
Yes so a lot of government contracts that 3% mark up is really the revenue that a lot of these contractors will only be making so they're sending essentially -- profits their earnings.
And telling the government to hold -- -- the essentially using and other credit card.
But it gets even better than -- -- -- you take you take this policy if I was to be put in place as we're discussing now.
The Department of Defense is saying it could cost in excess of seventeen billion dollars a year which by the way -- more -- will actually collecting from the tax to Begin with.
So here we go yet again just like with 1090 nines and just the really poorly thought out process and something that -- really troubling to the members you re represented accounts payable accounts receivable procure to pay and automation.
That's all this is passed the law about five years ago but is yet to be implemented why is that in what are the chances of it again I guess being postponed one more time or indefinitely.
Yeah well you know how how good the government is about -- putting these things into place I think giving them a long turnaround times the people hopefully we'll forget about them by the time that there in place.
We're hoping that we know we've been pushing really hard to have it not be actually passed not put into law.
We're seeing a lot this type -- stop at the state levels well where are our elected officials won't deal with the problems that and so they're putting -- -- all types of user taxes and impact fees and those types of things and what they're not thinking of is the fact that has a serious and significant impact.
On the end users so -- people indicated accounts payable accounts receivable worry is stretched -- they're not going to be LE implement this this is not a push a button type of thing in the make it happening there's going to cost.
Millions upon millions of dollars if this spreads beyond the government sector to the private sector we have even more issues and 3% may not sound like a lot but.
You said it you know each year there's over a hundred billion dollar -- small businesses that get government contracts.
You know that's a lot of money for them.
By their size limits here because as we know -- when the government likes the Levy tax they like to say well.
The big boy after the really rich people we're -- -- even more than the smaller ones you know.
No no this is 3% across the board of fact we rethink it's gonna hurt our smaller contractors much more significantly just 3% you know cash flows -- like anything you guys talk about this every day on your show.
Cash is king and 3% out of a large contracts that's a lot of money and you -- banks are exactly you know forthright and lending council where they gonna get that money to make it out so it's a big issue we're hoping.
It gets pulled up -- really look do we keep talking about a budget deficit.
What we have as the leadership deficit unless they're really start to get things straight and focus on the problem at hand.
We're gonna continue to have dismissed she's tax policy which hurts our members and that's what we're hoping to avoid set to take effect January 1 2013.
Unless of course -- -- you were speaking Tommy can be postponed.
-- repealed altogether Tom -- thank you sir.
They.
