Paul L. Caron

Saturday, March 4, 2017

NY Times:  U.S. Agents Raid Caterpillar Over Offshore Tax Practices

CaterpillarNew York Times, U.S. Agents Raid Caterpillar Over Offshore Tax Practices:

Federal agents raided three Caterpillar buildings near its Illinois headquarters on Thursday, company and law enforcement officials said, in an escalation of an inquiry into the heavy equipment manufacturer’s offshore tax practices.

Caterpillar has been dogged by accusations that it slashed its domestic tax bill by shifting corporate profits from the United States to a subsidiary in Switzerland. A 2014 congressional investigation concluded that a scheme to move cash between the company’s American and foreign subsidiaries cut its tax bill in the United States by $2.4 billion over 13 years.

The United States attorney’s office for the Central District of Illinois, the Internal Revenue Service criminal investigation division, and two other agencies led the search of Caterpillar buildings near Peoria, Ill., where Caterpillar is based, said Sharon Paul, a spokeswoman for the United States attorney. ...

The report of the 2014 investigation said that Caterpillar, which makes heavy construction and mining equipment, worked with the accounting firm PricewaterhouseCoopers, now PwC, to use sham transactions to transfer $8 billion in profits to a Swiss subsidiary from 1999 to 2012.

The transfers were not legitimate business transactions, but were made solely to take advantage of a lower tax rate Caterpillar had negotiated with Switzerland, Senator Carl M. Levin, Democrat of Michigan, said at the time. Caterpillar has said its effective United States tax rate was 29 percent. In Switzerland, the company negotiated a tax rate of 4 to 6 percent.

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