Caterpillar Defends Tax Practices

April 2, 2014

Caterpillar officials testified at a Senate hearing Tuesday, defending the company’s decision to divert some of its parts profits to a Swiss subsidiary.

According to a Bloomberg report, Julie Lagacy, Caterpillar’s vice president with responsibility for the Finance Services Division, testified that, “we pay the taxes we owe, not more.”

“We cannot remain competitive, we cannot create jobs and we cannot increase exports by incurring unnecessary expenses,” Lagacy said.

A Senate report released Monday indicated that the company avoided paying $2.4 billion in taxes since 2000.

According to the Los Angeles Times, Caterpillar transferred ownership of some of the spare parts housed in Caterpillar’s U.S. warehouses to a Swiss partnership called Caterpillar Sarl (CSARL). Cat reported U.S. sales of these parts to the IRS after CSARL turned the parts over to the company at no cost. International sales would be reported by CSARL to Swiss tax authorities at a rate of 4 to 5 percent, the report says. Tax consultant PricewaterhouseCoopers recommended this strategy to Caterpillar in 1998.  

Read more at Bloomberg and the Los Angeles Times