Blackwater owes payroll taxes, Waxman says

WASHINGTON – The chairman of a congressional oversight committee has charged that Blackwater Security Consulting, a major government contractor in Iraq, may have violated federal law by not paying taxes on its armed guards and could owe millions of dollars in back taxes.

Rep. Henry Waxman, D-Calif., chairman of the Oversight and Government Reform Committee, said in a letter sent Monday to Blackwater owner Erik Prince that panel staff calculated Blackwater may have avoided paying $31.8 million in Social Security, Medicare, federal income and unemployment taxes from May 2006 through March. In addition, Waxman said the company may owe $18 million more in taxes that it should have paid from April through September.

A Blackwater spokeswoman denied the company owed the taxes Waxman cited. Blackwater Security Consulting is a subsidiary of Blackwater Worldwide, formerly named Blackwater USA. Blackwater classifies armed guards as independent contractors instead of full-time employees, allowing it to avoid paying certain federal taxes. Waxman called Blackwater’s arrangement an “illegal tax scheme.”

Two other companies – Triple Canopy and DynCorp International – that have major contracts to provide security in Iraq classify their armed guards as full-time employees. The three companies received a $2.5 billion, six-year contract from the State Department to provide security in several countries, including Iraq.

Blackwater has come under intense scrutiny recently for its armed guards’ use of force. It is facing several U.S. government investigations since a Sept. 16 shooting incident involving its armed guards in which 17 civilians were killed in Baghdad.

An IRS spokeswoman would not comment on the case.