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Sunday, October 23, 2016

“Caterpillar is an American success story that produces phenomenal industrial machines, but it is also a member of the corporate-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes,” Senator Carl Levin (D-MI), chair of the Senate Permanent Subcommittee on Investigations, wrote of American manufacturing giant Caterpillar Inc. on Monday. “Caterpillar paid over $55 million for a Swiss tax strategy that has so far enabled it to avoid paying $2.4 billion in U.S. taxes.”

That incendiary charge is detailed in a report from Levin’s subcommittee. In it, the senator explains that Caterpillar paid PricewaterhouseCoopers LLP $55 million to design a tax strategy that involved the company shifting its supposed foreign profits to a wholly controlled Swiss subsidiary, called CSARL, rather than to its parts business in the U.S. The strategy is not illegal – but only if Caterpillar can prove that the income is, indeed, foreign and not domestic.

The Illinois-based company argues that the income funneled through Switzerland is foreign because the source of the profit is the company’s international parts-distribution division. But Caterpillar has no reported business activities in Switzerland, and the majority of its parts business remains based in the U.S.

Defending the company’s use of the Swiss tax strategy, Julie Legacy, who oversees Caterpillar’s tax operations, argued that “we cannot remain competitive, we cannot create jobs, and we cannot increase exports by incurring unnecessary expenses.”

She added, “And as an American company, we pay the taxes we owe, not more.”

Levin, however, is not buying Caterpillar’s argument. He claims that a “paper change” occurred between Caterpillar and Switzerland that allowed the company’s profits to be subject to a meager 4 percent Swiss tax rate – significantly less than the 35 percent corporate income tax the U.S. imposes on profits made overseas.

Though the committee report questions the tax strategy and its domestic effects, it does not accuse Caterpillar of having broken any laws.

Senate Democrats maintain that it ultimately is up to the Internal Revenue Service to determine whether or not Caterpillar violated a U.S. law.

Meanwhile, their GOP colleagues are standing behind Caterpillar, with some saying the violations are not as serious as those committed by other companies in the past.

Among Caterpillar’s top defenders in the upper chamber is Senator Rand Paul (R-KY), who dismissed Levin’s concerns and even suggested rewarding the country for avoiding U.S. taxes.

“I think rather than having an inquisition, we should probably bring Caterpillar here and give them an award,” Paul said on Tuesday. “You know, they’ve been in business for over 100 years. It’s not easy to stay in business.”

“It is a requirement that you try to minimize your costs. So rather than chastising Caterpillar, we should be complimenting them,” he added.

Paul and others in his party instead blame the U.S. tax code. Ironically, Levin has attempted to address the tax code by introducing legislation that would restrict U.S.-based corporations to shift profits overseas for the purpose of avoiding taxes, but the bill has stalled in the Senate.

Photo: Rrrrred via Flickr

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Copyright 2014 The National Memo
  • Lynda Groom

    If Catapillar tax avoidance business model is correct, does that put them among the taker class? If so why would either party support such a method of avoiding paying into our system? Just asking.

  • Dominick Vila

    Caterpillar is, indeed, an industrial icon that we should be proud of, but that does not exempt them from paying taxes like the rest of us do. Unfortunately for the USA, they are just one of many highly profitable corporations benefiting from a political climate and a tax system that allows companies that are posting record profits from paying taxes and contributing to the socio-economic environment they benefit from.
    The idea that allow corporations to pay no taxes is beneficial to us as nation because it guarantees good paying jobs is ridiculous. Nobody is proposing to tax our business community to the point that they can’t make a buck, to the point that shareholders are not making a good profit on their investments, or to the point that they cannot hire because taxes are too high. There is a difference between prudent taxation, national responsibility, and a system that is more likely to go after a single mother working two jobs, who is suspected of not having filed all her earnings, than going after corporations that use every loophole in the book to avoid paying their fair share.

  • John Kenner

    Through the Obama-phone program, the Obama regime is wasting $1.5 billion per year on mobile phones and service for brain-dead democrats.

    • Jim Myers

      Probably a little better than creating two wars and transferring Two Trillion Dollars from the American Tax Payers to the Military Industrial Complex.

      But, hey, that was okay. According to DICK Cheney, Ronald Reagan taught us that deficits don’t matter.

      Just sayin’…

      • JSquercia

        You forgot the asterisk in that statement Deficits don’t matter when Republican are in Power

        • Jim Myers


      • John Kenner

        Yeah, it’s not like LBJ got 58,000 Americans killed in Vietnam or anything. Wilson, in WWI? Got 116,000 Americans killed.

        Total Americans killed by democrat wars during the 20th century? Try 655,000.

    • Paul Bass

      From a 2/12/12 article in Forbes by Kellie Erb, “The federal program dates back to 1996; it was part of the Telecommunications Act of 1996.” and “The Act was not taxpayer funded”, “Yes, the program exists. No, it’s not an Obama administration program.”

      and from “Lifeline does not “give away” “government phones.” The program reimburses phone companies with a monthly subsidy of $9.25 for each low-income customer who uses a landline or a cell phone.”


      • Megumi Yuuki

        The Original Program was under Ronald Regan. Except then, it was for land lines, since Cell Phones were not around yet. The Cell Phone Bill inclusion was amended in 1996.

    • Lynda Groom

      John facts do matter. Paul Bass has provided some important ones for your use. As clearly stated the phony Obama free phone scandal is not there. Besides do you really believe that only democrats can be low-income customers?

    • Sand_Cat

      The “Obama-phone program” is actually the Reagan phone program.
      Who is it who’s brain-dead?

      • Megumi Yuuki

        You are 100% correct! The only difference is that in 1996, there was an update to include cell phones, instead of just having Land Lines as signed by Reagan. The cost to others did not change.

      • John Kenner

        Democrats have low IQs.

        In fact, back in 1971, about 200 democrats converged on Cape Canaveral to protest *against* the Apollo 14 moon mission. Brain-dead and anti-science – pretty much sums up the core constituencies of today’s democrat party.

        • Sand_Cat

          Wow, you just can’t stop yourself from pouring out the stupidity. Keep it up. It gives some great comic relief when contemplating the state of the nation.

    • Megumi Yuuki

      Obama Phone? You mean the Reagan Phone? Ronald Reagan is the President who implemented that program. You need to go back to school and lay off Fox’s Lies.

      • John Kenner

        Obama phones are just another form of welfare used by brain-dead democrats.

  • browninghipower

    I love it…the goopers just divert the conversation from the real issue of massive tax-avoidance to a phone program? I despise you on the right. You are traitors and scum. Caterpillar is a disgrace. You know, when I started out building my own company, I struggled and the IRS allowed me to take breaks and pay no taxes those first years..and to continue to follow my dream. When I finally succeeded and realized that I owed taxes for my success, guess what? I gladly paid my freakin/ taxes because I had ‘made it’ and I was grateful to pay back America for giving me time to succeed. Now you assholes on the right begrudge that. You have no feelings of gratitude or willingness to pay back and support the very country that has allowed you and Caterpillar to flourish. You are rotten to the core and you are goddamned traitors!!!! Pay up!!! It costs to belong to the greatest club in the world. You are part of America…not a part from it, you miserable selfish pricks. You and your kind will be the downfall of America.

    • Paul Bass

      I couldn’t have said it better myself, thank you for your comments!

    • Megumi Yuuki

      You said it better than anyone thus far. The right wing now is trying to squash competition so small businesses cant start up, instead relying on their enormous big Box stores sucking the Govt funds by not treating emnployees fairly. The Right Wing HATES Competition, so dont steal, evade taxes in a Caymen or Swiss account or open a new business.

  • JSquercia

    Is this the same IRS that wants to not allow any charitable deduction for the money I put in the Salvation Army Kettle

    • Paul Bass

      Wrong, all deductions placed in Salvation Army’s kettles AND in church baskets ARE deductible under the charitable deduction provision of the IRS tax code.

      • JSquercia

        I will have to check that out but I was TOLD by someone that the IRS would NOT accept any Charitable donation without proof such as a canceled check or receipt .

      • Megumi Yuuki

        The Salvation Army is NOT a tax free charity. It is a Private Organization (Quasi For Profit Church) for profit that Discriminates and denies services to people that do not fit their accepting level of christianity. This is Fact, and is stated under IRS guidelines of what is considered an acceptable Charity, and the The Salvation Army is NOT one of them.

    • Megumi Yuuki

      The Salvation Army, like Goodwill is NOT a Charity. They are fopr Profit and they are extremely discriminatory of who they help. Salvation Army has CLOSED soup kitchens and shelters out of SPITE because they are forced to treat ALL humans EQUALLY, and that is something they do not accept. They are both Bigots and are the reason so much Evil exist in the Ununited States. Therefore, the IRS does NOT recognize them as Chritable Organizations.

  • herchato

    The only way business will quit cheating America is if forced to by law and that takes congress. Don’t hold your breath.