James F. McDonough
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A number of companies have coming under scrutiny in recent months, as the U.S. reconsiders its corporate tax policy. The latest of these companies is the Peoria-based construction equipment manufacturer Caterpillar Inc., which is being probed by a U.S. Senate investigative panel to find out whether it avoided taxes by improperly moving profits overseas, according to Bloomberg. Two people familiar with the matter told the news source that the Senate’s Permanent Subcommittee on Investigations will hold a hearing in early April. Rachel Potts, a spokeswoman for Caterpillar, and Gordon Trowbridge, a spokesman for Subcommittee Chairman Carl Levin, both declined to comment.
Caterpillar’s overall tax rate has fallen steadily over the last 14 years, as it has moved more of its profits outside the U.S., according to Financial Times. The company was paying a tax rate of 32 percent in 1999, a number that fell to 25.7 percent in 2013. Over the same period of time, Caterpillar’s activities outside of the U.S. fell from 26 percent of its profits to 62 percent.
In 2009, Caterpillar Inc. was accused by then tax strategy employee Daniel Schlicksup of using a “Swiss structure” to offshore profits resulting in a $2 billion reduction in the companies tax rate, according to Bloomberg. According to the complaint, the Swiss structure involved “many shell corporations with no business operations,” in which management was shifted to offshore companies while in actuality continuing in the U.S. Schlicksup’s complaint also alleged that Caterpillar used a “Bermuda structure” to repatriate profits without paying U.S. taxes.
Schlicksup’s lawsuit, including the allegation that Caterpillar executives had retaliated against him, was settled in 2012, according to the news source. Caterpillar executives denied the allegations.
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