Caterpillar defends taxes attacked by U.S. Senate Democrat

WASHINGTON Tue Apr 1, 2014 6:39pm EDT

1 of 2. Caterpillar Inc former Senior International Tax Manager Rodney Perkins (L-R), Vice President for Finance Services Julie Lagacy and Chief Tax Officer Robin Beran are sworn in to testify at a U.S. Senate Permanent Subcommittee on Investigations hearing on Caterpillar's offshore tax strategy on Capitol Hill in Washington April 1, 2014.

Credit: Reuters/Jonathan Ernst

WASHINGTON (Reuters) - Caterpillar Inc defended itself on Tuesday against accusations of offshore tax-dodging, telling a U.S. Senate panel that a low-tax unit the company set up years ago in Switzerland has not been challenged by U.S. tax authorities.

Executives from the world's largest maker of mining and construction equipment were hauled in front of the Senate Permanent Subcommittee on Investigations to answer to allegations made by the panel in a 99-page report.

Released on Monday, it said Caterpillar avoided paying $2.4 billion in U.S. taxes from 2000 through 2012 by moving profits from sales of replacement parts through the Swiss unit, a strategy sharply criticized by the panel's chairman.

Democratic Senator Carl Levin said the Swiss arrangement had no business purpose other than to dodge taxes. "The documents couldn't be clearer, it's a tax deal," Levin said at the hearing, the latest in a series on corporate tax avoidance.

Caterpillar executives said its tax strategies, related to a complex corporate restructuring that began in 1999, were legal and in the best interest of its shareholders.

"We remain convinced that the restructuring and subsequent transactions comply with the tax law," said Julie Lagacy, vice president of Caterpillar's finance services division.

The Internal Revenue Service thoroughly examined the Swiss structure, called "CSARL," but did not challenge its validity, Caterpillar said in a statement to Reuters.

"Caterpillar has not paid additional taxes to settle a dispute over the CSARL structure," the statement said.

The IRS declined to comment on Caterpillar's taxes.

Shares of Caterpillar rose 44 cents on Tuesday to close at $99.81, in line with broader stock market gains.

PWC EXECS APPEAR

Along with three Caterpillar executives, representatives of Big Four accounting firm PricewaterhouseCoopers LLP, defended the tax advice it gave Caterpillar on its Swiss deal.

The hearing marked the latest foray by Congress into corporate tax management issues, with Democrats largely scolding corporate managers and some Republicans coming to their aid.

Republican senators said at the hearing Caterpillar and other multinational companies should not be blamed for shifting profits abroad to avoid the 35-percent U.S. corporate tax rate.

"We've got the wrong people on trial here. The tax code needs to be on trial here," said Republican Rand Paul, a libertarian and potential 2016 White House contender.

Past subcommittee hearings have focused on the tax avoidance strategies of Apple Inc, Hewlett-Packard Co and Microsoft Corp.

(Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh, Bernard Orr)

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Comments (4)
kcisobderf wrote:
Caterpillar spared no effort to bust it’s machinists union a couple years ago because no profit is too much.

Their offshored loot needs to be confiscated.

Apr 01, 2014 7:08pm EDT  --  Report as abuse
cooldude123 wrote:
so what, how much did the government waste tax payers money last year, that should be the headline. also what gives the right for u.s. to go fishing in other countries of who is putting their money there. if you want to catch a tax thief start looking at congress leaders and senators. hey, i pay my taxes, but why?????

Apr 01, 2014 7:30pm EDT  --  Report as abuse
Okay corp-whor-ations. Feed your shareholders and starve the families in America who are supposed to be helped by your taxes, and the militrsry, and all the people who are getting hurt by the sequester. And watch your country go down. Or do you really care? I guess not, you know, short term is the only concern. Capitalism really sucks when it is unregulated. I would rather be a socialist. Maybe its coming to that. You can move to Switzerland and make your junk.

Apr 01, 2014 8:46pm EDT  --  Report as abuse
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