Caterpillar Defends Tax Practices at Senate Hearing

Officials of Caterpillar sparred with members of a Senate panel on Tuesday, defending more than a decade’s worth of tax practices that put most of the company’s profits out of reach of United States tax authorities.

Members of the Permanent Subcommittee on Investigations came to a hearing on corporate tax avoidance armed with extensive evidence that since 1999, Caterpillar had been channeling its most profitable operations through a subsidiary in Switzerland, where it negotiated a tax rate of just a fraction of the American rate. They said the case exemplified ploys that American companies use to keep an estimated $2 trillion of profits offshore.

But Caterpillar officials insisted that the evidence was being misconstrued, and that the Swiss subsidiary was a real business, not a tax shelter.

“We do not invent artificial business structures,” Julie Lagacy, Caterpillar’s vice president for finance services, told the panel.

Ms. Lagacy said that the Swiss subsidiary had existed for decades, and that as Caterpillar’s global business grew in the 1990s, the company had to streamline its corporate flow chart to make its operations more efficient.

For more about Caterpillar's tax situation...