Controller: Unregistered Sub-Contractors Create Tax Loophole - DC News FOX 5 DC WTTG

City Controller: Unregistered Sub-Contractors Create Tax Loophole

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In a report released Tuesday, Philadelphia City Controller Alan Butkovitz says unregistered subcontractors have created a tax enforcement loophole and unsafe working conditions at several construction sites around the city.

The report, "Review of City Tax Evasion at Construction Sites," is the result of a 23-site investigation.

The report was put together after the city controller's office says it received information that commercial and residential construction contractors were compensating workers by cash or check to avoid reporting wage and business taxes.

Butkovitz says the investigation found nearly 100 conditions that violated tax laws or public safety ordinances -- many of which are being reviewed as City Code amendments by Councilmembers Bobby Henon and James Kenney.

According to the report, the investigation found more than a dozen sites where sub-contractors were not identified on various permits, which would make it difficult to determine if they were appropriately licensed.

At six sites, the report found that it could not be determined if contractors or sub-contractors even had an active business privilege license, which Butkovitz says is needed or else the "appropriate city business taxes cannot be properly filed and paid."

Butkovitz says his office found instances where it was very likely that general contractors were circumventing the collection of taxes but not properly identifying all of the workers on active job sites.

"Our prior study on the Underground Economy in Philadelphia estimated a direct cost to the city from lost wage taxes amounts to $2.1 million to $7.4 million," Butkovitz said.

According to his office, city council strengthened the Licenses and Inspections permit application and disclosure process to require contractors and sub-contractors to submit identifying information, such as their name and address.

Additional legislation has included public hearings to allow for the review and investigation of illicit construction industry practices, Butkovitz said.

You can read a full version of the report on the City Controller's website.

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