Caterpillar Avoids Paying $2.4 Billion in Taxes Via Swiss Government

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Surprise, surprise! Another major American company has been found by the U.S. Senate to have avoided paying U.S. taxes by going overseas and utilizing the flexible Switzerland tax laws. Caterpillar, the manufacturer for  construction and mining equipment, transferred $8 Billion that it had made in the U.S. to Switzerland, according to reports.

[Washington Post Excerpt]

{“Caterpillar is an American success story, but it is also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes,” Sen. Carl Levin (D-Mich.), chairman of the subcommittee, said during a news conference Monday.

Caterpillar’s effective income tax rate averages about 29 percent, which is one of the highest for a U.S. multinational manufacturing company,” Julie Lagacy, vice president of the financial services division at Caterpillar, said in a statement. “We comply with the tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business.”

Lagacy said Caterpillar’s business structure drives its tax structure. But the subcommittee contends that maximizing profits at the expense of U.S. taxpayers has played a much greater role.

It wasn’t always like this. PricewaterhouseCoopers, hired by Caterpillar as a tax consultant and auditor, devised the tax strategy in 1999, when 85 percent of the manufacturer’s profits were booked in the United States, according to investigators. The accounting giant was paid more than $55 million to find ways to lower the tax bill, the report said.

When Caterpillar and its tax advisers launched this tax-
avoidance scheme, almost nothing changed in the real world,” Levin said. “But in the fantasyland that is international tax law, tax lawyers waved a magic wand to make millions of dollars in U.S. taxes disappear.”

The subcommittee also questioned the ethics of PricewaterhouseCoopers acting as Caterpillar’s accountant at the same time it was auditing the company.

Caroline Nolan, a spokeswoman for PricewaterhouseCoopers, dismissed the accusation of impropriety, saying that the company has maintained independence at all times. She said the firm was compensated for six years of extensive work to help Caterpillar improve its operations.

“We stand by the work we did for them,” Nolan said in an e-mail. “Our advice . . . helped Caterpillar evaluate how best to organize its expanding global operations, aligning the economics of such global operations with carefully considered U.S. tax policies.”}

Do these finding surprise you? Why is that someone who evades taxes on a lower socioeconomic level can be thrown in jail, but for a major corporation it’s ‘ok’ as long as tax avoidance laws are in place?

Only in America.