CAT to have its day in court

A CATERPILLAR executive is to testify before the US senate subcommittee this month about allegations the company avoided tax through a complex international structure.

Sadie Davidson

Vice-president with responsibility for the finance services division Julie Lagacy will discuss Caterpillar’s business planning and tax structure.

“Caterpillar takes very seriously its obligation to follow tax law and pay what it owes,” said Lagacy.

“In fact, Caterpillar’s effective income tax rate averages about 29%, which is one of the highest for a US multinational manufacturing company”, she added.

After a review of Caterpillar’s international tax compliance, the Permanent Subcommittee on Investigations chairman’s staff report focuses on parts sales outside of the United States by Caterpillar subsidiary, Caterpillar SARL.

The investigation is likely to provide an insight into how multinational corporations drastically restructure their supply chains, and move billions of dollars of taxable profits into low tax countries.

Caterpillar’s tax rate has fallen over the past 15 years because more of its profits have been taxed outside the US.

Between 1999 and 2013 CAT’s tax rate fell from 32% to 25.7% as the levels of business outside the US rose from 26% to 62%.

The company’s tax strategies also came under fire in a 2009 lawsuit.

Caterpillar was accused by an employee of moving profits overseas to evade billions in taxes siphoning money to Switzerland, Luxembourg and Bermuda.

The company denied the allegations and, in 2012, settled the suit with the employee.

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