The $2.4 Billion Tax Question for Caterpillar

Caterpillar Inc. has deferred or avoided paying $2.4 billion of U.S. taxes under a corporate restructuring 15 years ago that shifted most of the profits from overseas replacement-part sales to a Swiss subsidiary, according to a Senate subcommittee report. Sen. Carl Levin, the Michigan Democrat who chairs the Senate's Permanent Subcommittee on Investigations, said at a news briefing that the maker of construction and mining equipment "waved a magic wand" to make tax liabilities disappear. Caterpillar said it has set up a "standard multinational business structure entirely consistent with the letter and spirit of U.S. tax law." The company said its effective tax rate averages 29% and is three percentage points higher than the average for U.S. corporations. Sen. Levin said it would be up to the Internal Revenue Service to determine whether Caterpillar's tax practices violated any rules.

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