TheStreet.com reports that during yesterday's webcast of Bank of America Merrill Lynch Global Industrials & EU Autos Conference in London, investor relations director, Amy Campbell, answered Merrill Lynch analyst Ross Gilardi's questrion about the scope of the current investigation into Caterpillar's tax dealings, saying, "I don't have any speculation on any type of financial numbers, but the search warrant was broader than just the matters related around the IRS issue, so it included export filings among other things. And like I said, we're still trying to gain an understanding of the complete picture of why the authorities came in the way they did."
Campbell also said Caterpillar has recieved a copy of Dr. Leslie A. Robinson's 85-page report mentioned in the New York Times March 7, 2017 article and that the company is reviewing it.
Dr. Robinson is an accounting professor at the Tuck School of Business at Dartmouth College and the author of the report. Who hired her to write the report is unclear but she wrote that she was asked to provide a written opinion of Caterpillar’s financial reporting related to various tax accounting standards, “as pertaining to” the investigation of Caterpillar by the Federal Deposit Insurance Corporation Office of Inspector General.
Dr.Robinson's analysis estimated that Caterpillar has brought back $7.9 billion into the States, structured as loans, over and beyond the income that had already been taxed overseas. She concluded that the company failed to report those loans for tax or accounting purposes, and she wrote that those profits should be subject to federal taxes. “I believe that the company’s noncompliance with these rules was deliberate and primarily with the intention of maintaining a higher share price. These actions were fraudulent rather than negligent.”
According to an earlier AP report, a 2014 report by U.S. Senate Democratic staff said that Caterpillar had avoided paying $2.4 billion in U.S. taxes since 2000 by shifting profits to the affiliate in Switzerland.
That report said Caterpillar paid PricewaterhouseCoopers LLP $55 million to develop the tax strategy. Under the strategy, Caterpillar transferred the rights to profits from its parts business to a wholly controlled Swiss affiliate called CSARL, even though no employees or business activities were moved to Switzerland.
In exchange, CSARL paid a small royalty, and the income was taxed at a special rate of 4 to 6 percent that Caterpillar negotiated with the Swiss government, the report said.
Before the arrangement, 85 percent of the profits from the parts business were taxed in the U.S., the report said. Afterward, only 15 percent of the profits were taxed in the U.S. The rest was taxed at the special rate in Switzerland, the report said.
No charges have been filed at this time.