Caterpillar to face U.S. Senate panel on offshore taxes

WASHINGTON Fri Mar 28, 2014 4:41pm EDT

A Caterpillar excavator machine is seen at a work site in Detroit, Michigan January 25, 2013. REUTERS/ Rebecca Cook

A Caterpillar excavator machine is seen at a work site in Detroit, Michigan January 25, 2013.

Credit: Reuters/ Rebecca Cook

WASHINGTON (Reuters) - Caterpillar Inc's offshore tax strategies will come under scrutiny on Tuesday at a U.S. Senate hearing expected to examine dealings by the world's largest mining and construction equipment maker in Switzerland, Bermuda and Luxembourg.

With many multinationals being criticized for tax avoidance, veteran tax sleuth Senator Carl Levin will chair another session of his Permanent Subcommittee on Investigations, with three current and former Caterpillar executives slated to testify.

Levin's panel dives deeper than any other on Capitol Hill into the minutia of tax law and accounting, with its Caterpillar probe expected to center on the tax aspects of Caterpillar's corporate restructurings in the late 1990s and early 2000s.

Big Four accounting firm PricewaterhouseCoopers LLP, which advised Caterpillar on its tax strategies, is also sending three officers to the hearing as witnesses.

A Caterpillar spokeswoman declined to answer questions about the company's tax strategies. A spokeswoman for Levin declined to comment. PricewaterhouseCoopers also declined to comment.

Levin's panel has not detailed its findings, but a lawsuit involving the restructurings that was settled in 2012 may offer clues about the hearing's focus, said Richard Harvey, a former Internal Revenue Service official who reviewed court records from the lawsuit that detailed some of Caterpillar's dealings.

"One would hope the IRS took a very close look at these transactions," said Harvey, now a tax professor at Villanova University. He testified before Levin's committee last year.

Beginning in 1999, Caterpillar shifted a "replacement parts" division from the United States to Switzerland and executives said one purpose was to reduce taxes, according to the records.

In 2005, Caterpillar set up units in low-tax Bermuda and Luxembourg, according to the court filings.

In a memo dated November 21, 2006, Caterpillar chief tax officer Robin Beran said: "Two internal reorganizations were completed, leveraging the Bermuda/Lux structure, allowing repatriation of nearly $1.5 billion cash to the U.S. without incremental U.S. tax."

Beran is one of the Caterpillar officers set to testify. He declined to comment on Friday.

Daniel Schlicksup, a former Caterpillar tax official, sued the company in 2009, alleging he was retaliated against by executives for raising concerns internally about its tax dealings.

Schlicksup said Caterpillar's offshore tax structures helped it avoid more than $2 billion in U.S. taxes, according to his complaint. A lawyer for Schlicksup declined to make his client available for comment.

(Editing by Kevin Drawbaugh and Ken Wills)

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Comments (2)
Wulff wrote:
So CAT is under scrutiny by Levin. This is all about the BIG LIE of businesses paying or avoiding taxes. Tax avoidance remains legal. Tax evasion is ever illegal. We citizens, who are taken by politicians to be fools, allow this theater of the absurd to blind us to the simple truth that business does not pay taxes! Businesses simply pass the taxes along to the consumer as the cost of the item or service provided. DUH! If a sales tax is involved, and when isn’t it, it becomes a tax compounded! Pay attention and see if this concept ever surfaces in these “oversight hearings.” It won’t. It’s a BIG LIE because everyone is in on it! Even the business world plays along with the gag. Simply disgusting!

Mar 28, 2014 8:59pm EDT  --  Report as abuse
GSimp wrote:
It would be funny if it weren’t so sad. Our esteemed elected officials intentionally create a tax code that is massively complex with the goal of helping their friends, family, and most importantly contributors avoid paying taxes. Then they get upset when someone other than their intended beneficiaries take advantage of their at best sleazy loophole after it is created.

Mar 29, 2014 6:12pm EDT  --  Report as abuse
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