Free Republic
Browse · Search
News/Activism
Topics · Post Article

Skip to comments.

Caterpillar avoided $2.4B in taxes, charges Sen. Levin
The Hill ^ | March 31, 2014 | Peter Schroeder

Posted on 03/31/2014 4:18:22 PM PDT by jazusamo

Caterpillar avoided $2.4 billion in taxes thanks to a reorganization that housed its most profitable business in Switzerland, according to a Senate report.

While the report, from the Senate Permanent subcommittee on Investigations, said Caterpillar had done nothing illegal, it criticized the manufacturing giant for trying to avoid paying U.S. taxes.

“Caterpillar is an American success story that produces tremendous industrial machines,” Sen. Carl Levin (D-Mich.), the head of the investigatory panel, said Monday. “But it’s also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes,” Levin said. “This is a prime example of a tax avoidance strategy that has cost the U.S. Treasury billions of dollars.”

In response to the report, Caterpillar said it was just one part of the company’s business, and that it is not trying to skirt U.S. tax laws. The company noted that its effective income tax rate averages about 29 percent, one of the highest for a U.S. multinational manufacturing company.

“Caterpillar takes very seriously its obligations to follow tax law and pay what it owes,” said Julie Lagacy, the company’s vice president overseeing the financial services division. “Caterpillar’s philosophy is that our business structure drives our tax structure. We comply with tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business.”

The report found that in 1999, Caterpillar paid $55 million to develop a tax strategy that allowed it to report most of its profits for the sale of equipment parts under a wholly owned Swiss subsidiary, where it would be hit by just a 4 to 6 percent tax rate.

The vast bulk of the company’s work researching, manufacturing and storing parts continued to happen on U.S. soil, but 85 percent of the profits from that work were found in Switzerland.

The arrangement remains in place, according to the Senate report, and the company reaps roughly $300 million in tax savings a year from it.

Before the 1999 restructuring, the company reported at least 85 percent of its parts profits in the United States.

Monday’s report marks the latest in a long-running campaign by Levin to place heat on large corporations looking to minimize their tax bill, and the financial institutions that make it possible.

Levin has previously dissected the offshore tax maneuverings of Apple and Microsoft, and has pressured a number of large Swiss banks that entice companies with secrecy and lower tax bills.

Levin billed the latest report as evidence of how widespread the practice is.

Arizona Sen. John McCain, the top Republican on Levin’s panel, has co-signed on to many of Levin’s past findings, but he did not endorse the Caterpillar report.

Levin said the two senators differed on its conclusions.

Levin said staff for both members worked on the investigation; a McCain spokesman declined to detail the senator’s specific concerns with the document.

Top executives for Caterpillar and PricewaterhouseCoopers, which structured the tax arrangement, are slated to testifyTuesday before Levin’s panel, the latest in a series of corporate grillings.

McCain will attend Tuesday’s hearing.

The report emphasized how little parts work was actually done by Caterpillar in Switzerland, even though the lion’s share of profits were reported in that country.

For example, of the 8,300 company employees working on parts, 4,900 are based in the United States. Just 65 parts employees work in Switzerland, and less than 0.5 percent of the company’s workforce is based there.

The U.S. is also home to 54 manufacturing facilities and 10 warehouses for parts. Switzerland does not have any.

The company was able to report the bulk of its parts profits in Switzerland thanks to the 1999 restructuring. Under the new arrangement, Caterpillar agreed to transfer the rights to most of its parts profit to the Swiss subsidiary. The Swiss subsidiary would handle the sales of parts to Caterpillar’s non-U.S. dealers, and pay Caterpillar a royalty equal to 15 percent of the profits as part of the arrangement.

In the process, the company agreed to continue to perform the “core business functions” of that parts division in the U.S. in exchange for a small service fee.

In essence, Levin’s report argues that Caterpillar’s restructuring did almost nothing to alter the company’s operations, except for the fact that its most profitable division would now see those profits taxed at a much lower rate.

“Did anything change in the real world? Did anything change in its operations?” he asked. “The answer is no.”

The report called on the IRS to cast a closer look on such arrangements, and to question whether there is actual economic substance to the moves beyond lowering a tax bill — as required by law. Levin was critical of the IRS’s handling of this, and the ongoing arrangement could still be audited by the tax agency.

“In general, I’d say they’ve not been effective,” he said.

— This story was updated at 5:37 p.m. with a response from Caterpillar.


TOPICS: Business/Economy; News/Current Events
KEYWORDS: caterpillar; levin; taxes
Navigation: use the links below to view more comments.
first 1-5051-55 next last
Atta boy Levin, sic the IRS on them because it seems the RATS have a habit of that. If Caterpillar is following the law you don't have a leg to stand on.
1 posted on 03/31/2014 4:18:22 PM PDT by jazusamo
[ Post Reply | Private Reply | View Replies]

To: jazusamo

A rational person would look at what drove them to avoid the taxes.


2 posted on 03/31/2014 4:20:16 PM PDT by cripplecreek (REMEMBER THE RIVER RAISIN!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
They should threaten to just shutdown their Ohio operation and move everything overseas. See if there is any back pedaling.
3 posted on 03/31/2014 4:21:19 PM PDT by BipolarBob
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
It's one of the few big businesses we still have in Illinois. The rats must destroy it.
4 posted on 03/31/2014 4:21:58 PM PDT by CrazyIvan (Obama phones= Bread and circuits.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: cripplecreek

Exactly, and not only them but many other corporations.


5 posted on 03/31/2014 4:22:36 PM PDT by jazusamo ([Obama] A Truly Great Phony -- Thomas Sowell http://www.freerepublic.com/focus/news/3058949/posts)
[ Post Reply | Private Reply | To 2 | View Replies]

To: jazusamo
Caterpillar does a boatload (or two) of business overseas.

Levin needs to just go home and continue to suck off the public as he has done for decades.

He's a Taker, NOT a Maker.

6 posted on 03/31/2014 4:23:33 PM PDT by Paladin2
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
While the report, from the Senate Permanent subcommittee on Investigations, said Caterpillar had done nothing illegal, it criticized the manufacturing giant for trying to avoid paying U.S. taxes.

So is Levin saying that Democrats always try to maximize their tax exposure?

7 posted on 03/31/2014 4:23:43 PM PDT by E. Pluribus Unum ("The man who damns money has obtained it dishonorably; the man who respects it has earned it.")
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

Levin forgets all of those union Cat workers that are forced to give a chunk of their paycheck to democrats


8 posted on 03/31/2014 4:24:21 PM PDT by digger48
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
Congress writes a bullshit code so that its members can please their lobbyists. And then Congress is upset when tax specialists figure out how to beat said BS code.

Like Cruz says...scrap the tax code and abolish the IRS.

9 posted on 03/31/2014 4:24:41 PM PDT by RoosterRedux (My tagline was hacked by the NSA.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

How much did SOLYNDRA avoid in taxes along with ALL taxpayer dollars
GIVEN to them????


10 posted on 03/31/2014 4:25:26 PM PDT by Kit cat (OBummer must go)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

There is nothing illegal or immoral about avoiding taxes. In fact it is management’s duty to their owners.


11 posted on 03/31/2014 4:26:01 PM PDT by DManA
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
While the report, from the Senate Permanent subcommittee on Investigations, said Caterpillar had done nothing illegal, it criticized the manufacturing giant for trying to avoid paying U.S. taxes.

I thought that was being smart, like avoiding speeding to avoid speeding tickets… or should we treat people that obey the speed limit as government revenue dodgers?

12 posted on 03/31/2014 4:27:05 PM PDT by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

Conclusion, Levin wants money from Caterpillar.


13 posted on 03/31/2014 4:29:12 PM PDT by RginTN
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

The ultimate goal of the Marxist, aka Democrats, will be to nationalize all American industry in the new USSA.


14 posted on 03/31/2014 4:29:31 PM PDT by AlexW
[ Post Reply | Private Reply | To 1 | View Replies]

To: OneWingedShark

If you take the standard deduction you are avoiding taxes.


15 posted on 03/31/2014 4:30:09 PM PDT by DManA
[ Post Reply | Private Reply | To 12 | View Replies]

To: jazusamo
Memo To: Rat Levin

From: Caterpillar

Subject: Rat taxes

Message: Per your request, we will move all Caterpillar facilities to Switzerland.

16 posted on 03/31/2014 4:30:23 PM PDT by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
[ Post Reply | Private Reply | To 1 | View Replies]

I avoid every single tax I can, if I thought I might get away with it, I might even evade a few.
17 posted on 03/31/2014 4:32:00 PM PDT by Graybeard58 (God is not the author of confusion. 1 Cor 13: 33)
[ Post Reply | Private Reply | To 15 | View Replies]

To: jazusamo

Levin is just annoyed that the company still does ANY business in the United States, obviously we need a few more tax hikes to ensure that U.S.-based corporations get the message that they’re no longer welcome in this country.


18 posted on 03/31/2014 4:32:36 PM PDT by jameslalor
[ Post Reply | Private Reply | To 1 | View Replies]

To: DManA
If you take the standard deduction you are avoiding taxes.

Again, being smart.
Though I am philosophically opposed to our current income tax system:
(1) Withholding is immoral, and either theft or forcing the employer to commit fraud.
(2) The deduction / exemption system is encouragement for fraud and political power abuse.
(3) The bracket system (graduated rates) combined with the above is a useless make-work program for the IRS to justify itself.

19 posted on 03/31/2014 4:35:02 PM PDT by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
[ Post Reply | Private Reply | To 15 | View Replies]

To: jazusamo

Levin is steaming mad because the guys a Caterpillar are a lot smarter than the guys at Big Government, and made Big Government look like fools.


20 posted on 03/31/2014 4:35:38 PM PDT by Balding_Eagle (Over production, one of the top 5 worries for the American Farmer every year.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: DManA
There is nothing illegal or immoral about avoiding taxes. In fact it is management’s duty to their owners.

You nailed it...From us lowly peons right up to the largest corporations.

21 posted on 03/31/2014 4:36:10 PM PDT by jazusamo ([Obama] A Truly Great Phony -- Thomas Sowell http://www.freerepublic.com/focus/news/3058949/posts)
[ Post Reply | Private Reply | To 11 | View Replies]

To: jazusamo

I’m sure Levin doesn’t take advantage of tax laws to minimize his own tax liabuility.


22 posted on 03/31/2014 4:36:27 PM PDT by umgud
[ Post Reply | Private Reply | To 1 | View Replies]

To: Balding_Eagle

Yep, and Levin’s really ticked because that’s not hard to do. lol


23 posted on 03/31/2014 4:39:26 PM PDT by jazusamo ([Obama] A Truly Great Phony -- Thomas Sowell http://www.freerepublic.com/focus/news/3058949/posts)
[ Post Reply | Private Reply | To 20 | View Replies]

To: jazusamo

It is the responsibility of every CEO/CFO in America to manage tax liability. If they do a poor job, they are exposed to shareholder liability and worse.

Levin is an idiot.


24 posted on 03/31/2014 4:39:53 PM PDT by Oldeconomybuyer (The problem with socialism is that you eventually run out of other people's money.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: Oldeconomybuyer

No, Levin is not an idiot.

Levin is a warrior, a class war warrior. His intent is to enrage his old union base, most blacks and all on welfare to hate corporations and vote democrat

His weapons are words


25 posted on 03/31/2014 4:45:36 PM PDT by bert ((K.E. N.P. N.C. +12 ..... History is a process, not an event)
[ Post Reply | Private Reply | To 24 | View Replies]

To: jazusamo

Caterpillar also avoided bankruptcy. Shouldn’t that be the real point!


26 posted on 03/31/2014 4:46:27 PM PDT by DaveyB ("When injustice becomes the law; rebellion becomes duty." - Thomas Jefferson)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

How dare CAT not allow the government to piss away every damn last dime of their tax payments.


27 posted on 03/31/2014 4:47:21 PM PDT by headstamp 2 (What would Scooby do?)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

2.4 Billion? That would pay for about 20 Chicago teachers pensions.


28 posted on 03/31/2014 4:48:06 PM PDT by Rennes Templar
[ Post Reply | Private Reply | To 1 | View Replies]

To: Oldeconomybuyer

They have a fiduciary responsibility to do that.


29 posted on 03/31/2014 4:48:58 PM PDT by Lurkina.n.Learnin
[ Post Reply | Private Reply | To 24 | View Replies]

To: jazusamo

If it was legal then GOOD FOR CAT!


30 posted on 03/31/2014 5:16:22 PM PDT by Castigar
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

What Sen Levin really means is:

Look here, we passed these complicated laws for ourselves and our close friends, how dare you use the same law to shelter your income. I know just because us folks in the Ruling Class have been doing it forever(see Kennedy Trust) doesn’t mean it was meant for everyone, and we Don’t Like it.


31 posted on 03/31/2014 5:24:53 PM PDT by eyeamok
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

What the heck has the federal government done to make Caterpillar successful???

They did nothing illegal, just smart, in avoiding the ridiculous taxes levied by the Socialists in D. C. and IL.


32 posted on 03/31/2014 5:25:42 PM PDT by txrefugee
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
and how many tax accountants does that scumbag Levin employ to lower HIS tax burden??? feh...
33 posted on 03/31/2014 5:30:54 PM PDT by Chode (Stand UP and Be Counted, or line up and be numbered - *DTOM* -vvv- NO Pity for the LAZY - 86-44)
[ Post Reply | Private Reply | To 1 | View Replies]

To: umgud
I’m sure Levin doesn’t take advantage of tax laws to minimize his own tax liabuility.

I am sure of that too but let's see a full IRS anal probe of Levin's dealings anyway ... for transparency.

34 posted on 03/31/2014 5:35:09 PM PDT by TigersEye (Stupid is a Progressive disease.)
[ Post Reply | Private Reply | To 22 | View Replies]

To: jazusamo
Obama trying to get even for Obama's lie about Caterpillar and jobs?
Those bastard Libs should never be given a Job since they hate Capitalism to much.
I recommend All companies fire every Lib on their payroll. Pronto.
35 posted on 03/31/2014 5:37:48 PM PDT by MaxMax (Pay Attention and you'll be pissed off too! FIRE BOEHNER, NOW!)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

With no thanks to levin, expect caterpillar to close up shop in the US in the near future. The industrial decline in the US, and loss of heavy manufacturing here in the US is the last nail in the coffin for a company like caterpillar. The US is in its post industrial decline, being replaced by the downward spiral service and financial industries. When you get to the point where your country only trades haircuts and hamburgers for worthless paper, you’re basically screwed. Enjoy the ride down.


36 posted on 03/31/2014 5:49:54 PM PDT by factoryrat (We are the producers, the creators. Grow it, mine it, build it.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

Anytime a company can avoid paying more taxes to an over bloated POS government like ours is a good thing.

Rue the day!


37 posted on 03/31/2014 6:05:11 PM PDT by unixfox (Abolish Slavery, Repeal the 16th Amendment)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

Go Caterpillar, starve the freakin beast!!


38 posted on 03/31/2014 6:11:46 PM PDT by AllAmericanGirl44
[ Post Reply | Private Reply | To 21 | View Replies]

To: jazusamo

I am amazed at the magnitude of Carl Levin’s greed.


39 posted on 03/31/2014 6:12:16 PM PDT by Hoodat (Democrats - Opposing Equal Protection since 1828)
[ Post Reply | Private Reply | To 1 | View Replies]

To: CrazyIvan

They destroyed it here in York, PA, and over 1,100 jobs were lost in 1998, thanks to the scum UAW 17-mo strike. Not much remains, and that might be going away this year.


40 posted on 03/31/2014 6:18:35 PM PDT by carriage_hill (Peace is that brief glorious moment in history, when everybody stands around reloading.)
[ Post Reply | Private Reply | To 4 | View Replies]

To: jazusamo
If the US adopted a sane corporate tax structure like other countries, hundreds of billions of dollars in capital might be repatriated.

But they certainly will not be when they face a 40% tax.

BTW my boss met a millionaire Swiss businessman recently: his total tax burden (without any special breaks) is 18%.

41 posted on 03/31/2014 6:36:40 PM PDT by pierrem15 (Claudius: "Let all the poisons that lurk in the mud hatch out.")
[ Post Reply | Private Reply | To 1 | View Replies]

To: pierrem15

You’re absolutely right...Until the idiots in Washington realize that our industries will keep moving out of the country.


42 posted on 03/31/2014 6:46:05 PM PDT by jazusamo ([Obama] A Truly Great Phony -- Thomas Sowell http://www.freerepublic.com/focus/news/3058949/posts)
[ Post Reply | Private Reply | To 41 | View Replies]

To: jazusamo

Are they within the law? If so, pee up a rope, Carl.


43 posted on 03/31/2014 6:51:26 PM PDT by Some Fat Guy in L.A. (Still bitterly clinging to rational thought despite it's unfashionability)
[ Post Reply | Private Reply | To 1 | View Replies]

To: RginTN
"Conclusion, Levin wants money from Caterpillar.

Not just Levin, but multiple RAT senators up for reelection - Levin is taking point.
44 posted on 03/31/2014 6:54:01 PM PDT by indthkr
[ Post Reply | Private Reply | To 13 | View Replies]

To: jazusamo

Well done Caterpillar. The company does not exist for the benefit of the Government, it’s owned and exists for the benefit of its shareholders. Typical B.S. from the party whose leader believes “you didn’t build that”


45 posted on 03/31/2014 7:05:17 PM PDT by Timocrat (Ingnorantia non excusat)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo
Arizona Sen. John McCain, the top Republican on Levin’s panel, has co-signed on to many of Levin’s past findings, but he did not endorse the Caterpillar report.

Follow the money.

46 posted on 03/31/2014 7:08:47 PM PDT by aposiopetic
[ Post Reply | Private Reply | To 1 | View Replies]

Hey Levin, IT'S THEIR MONEY!
47 posted on 03/31/2014 7:15:20 PM PDT by 2111USMC (Aim Small Miss Small)
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

Tax avoidance is good stewardship and not illegal.


48 posted on 03/31/2014 8:16:34 PM PDT by the_daug
[ Post Reply | Private Reply | To 1 | View Replies]

To: jazusamo

What is the term for threatening congressional action but withdrawing support after a sizeable donation?


49 posted on 03/31/2014 8:19:18 PM PDT by griswold3 ("Pray for Obama. Psalm 109:8".)
[ Post Reply | Private Reply | To 5 | View Replies]

To: jazusamo

Carl Levin is a disgrace. He wrote letters to IRS to deny tax exempt status telling IRS to to target Tea Party organizations. Now he is parading Caterpillar in front of Committee on Homeland Security and Governmental Affairs accusing Caterpillar of avoiding billions in taxes yet he has the gall to say that Caterpillar is not breaking any laws. Dear Carl, if Caterpillar is not breaking any laws then they are not avoiding taxes. If you want to change the law, then change it! Quit singling out and slandering individual taxpayes, like Apple and Caterpillar.

“The report raises questions about the validity of the tax strategy but doesn’t accuse the Peoria, Ill.-based manufacturer of breaking the law.

“We don’t reach those kinds of judgments,” Levin said. “The question is, ‘Is it tolerable?’ And I don’t think it is.”
http://www.dailyfinance.com/2014/04/01/caterpillar-avoided-billions-taxes-senator-carl-levin-says/


50 posted on 04/01/2014 7:51:58 AM PDT by Rock N Jones
[ Post Reply | Private Reply | To 1 | View Replies]


Navigation: use the links below to view more comments.
first 1-5051-55 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
News/Activism
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson