Senate Report Claims Caterpillar Avoided $2.4bn in US Taxes

Photo Credit: Eric Vidal /Reuters

Photo Credit: Eric Vidal /Reuters

One of the world’s biggest manufacturing companies diverted more than $8bn in profits to Switzerland in order to avoid US taxes, according to investigators working for the Senate.

Caterpillar, the world’s largest maker of construction and mining equipment, allegedly avoided paying more than $2.4bn in US taxes over a decade by striking a deal with Swiss tax authorities to pay as little as 4% on the profits from its lucrative international spare parts business through a Geneva-based subsidiary.

Though the practice of basing such subsidiaries offshore is widespread among multinationals, and Senate investigators refused to say whether they believe the company broke US tax law, the elaborate accounting strategy appears to take so-called ‘transfer pricing’ practices to new extremes.

The report, which was produced by the Senate subcommittee on investigations under chairman Carl Levin, a Michigan Democrat, claims that 85% of Caterpillar’s international profits from selling parts – its most profitable activity – were routed through its Swiss subsidiary, even though the vast majority of associated manufacturing, research and employment remained in the US.

“Caterpillar is an American success story that produces phenomenal industrial machines, but it is also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying US taxes,” Levin told reporters in a briefing on Capitol Hill.

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