Executives from Caterpillar Inc. will defend the company's offshore tax strategies at a U.S. Senate hearing scheduled today, Reuters reported.
The report released Monday by the Senate Subcommittee on Investigations said that Caterpillar avoided paying $2.4 billion in U.S. taxes from 2000 through 2012 by moving profits from sales of replacement parts through a low-tax unit it set up in Switzerland.
The Swiss structure was set up for no other reason than to avoid U.S. taxes, Sen. Carl Levin, the Democrat who chairs the subcommittee, said Monday.
According to the report, Caterpillar was able to take a profitable U.S.-based business, change little if anything about its operations and locate it in Switzerland for tax purposes, Newsday reported. The tax structure saves Caterpillar, which is based in Peoria, Ill., about $300 million a year, or 7.9 percent of 2013 net income.
Caterpillar, the world's largest mining and construction equipment maker, said on Monday the Swiss structure is legal and is a standard business move for many multinational companies, Reuters reported.
"Caterpillar stands by this structure," said Julie Lagacy, vice president of Caterpillar's finance services division, according to prepared testimony released ahead of the hearing.
According to data compiled by Bloomberg News, the largest U.S. companies have accumulated $1.95 trillion in profits outside the country that haven't been taxed by the United States. Caterpillar has $17 billion in untaxed profits, up from $11 billion three years earlier, according to company securities filings.