The Ottumwa Courier

AP National

April 1, 2014

Senator says Caterpillar avoided billions in taxes

WASHINGTON (AP) — Executives from manufacturing 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 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 Sen. Carl Levin, D-Mich.

Levin chairs the Senate investigations subcommittee. His subcommittee is holding a hearing on the report Tuesday. Representatives from Caterpillar and accounting firm PricewaterhouseCoopers LLP are scheduled to testify.

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. It was released Monday.

The report raises questions about the validity of the tax strategy but 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."

Levin's subcommittee has examined the tax practices of various U.S.-based corporations, including Apple, Microsoft and Hewlett-Packard. Levin said he chose to examine Caterpillar because it was a clear example of tax avoidance.

Levin has introduced legislation to restrict the ability of U.S.-based corporations to shift profits overseas to avoid U.S. taxes. But the bill has stalled in the Senate.

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