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.
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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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