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Caterpillar stands accused

Executives from equipment giant Caterpillar Inc. are heading to Capitol Hill to explain what one senator calls an aggressive strategy to avoid paying billions of dollars in U.S. taxes.

Caterpillar has allegedly avoided paying $2.4 billion in U.S. taxes since 2000 by shifting profits to a wholly-controlled affiliate in Switzerland, according to a report released by Senator Carl Levin.   Levin chairs the Senate investigations subcommittee. His subcommittee is holding a hearing on the report Tuesday.

The report says Caterpillar paid PricewaterhouseCoopers $55 million to develop its tax strategy.

The committee’s Democratic staff compiled the report as part of a nine-month investigation into Caterpillar’s taxes. The report raises questions about the validity of the tax strategy.   However, it does not accuse the Peoria, Ill.-based manufacturer of breaking the law.

“We don’t reach those kinds of judgments,” Levin said. “The question is, ‘Is it tolerable?’ And I don’t think it is.”

Julie Lagacy, a Caterpillar vice president, said in a statement that the company complies with all tax laws. She said Caterpillar pays an effective income tax rate of 29 percent, among the highest for multinational manufacturers.

“Caterpillar takes very seriously its obligation to follow tax law and pay what it owes,” Lagacy said. “Caterpillar’s philosophy is that our business structure drives our tax structure. We comply with the tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business.”

Read the full story here.

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