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 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.
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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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