Caterpillar is fighting an Internal Revenue Service demand that the company pay $2 billion in taxes and penalties for profits assigned to its Swiss parts distribution subsidiary, according to filings with the Securities and Exchange Commission. That subsidiary was also the subject of a 2014 Senate committee report that concluded Caterpillar shifted billions in profits abroad and had $2.4 billion in taxes deferred or avoided from 2012.
“As a result of those licensing and servicing agreements,
over the next thirteen years from 2000 to 2012, Caterpillar shifted to CSARL in Switzerland taxable income from its non-U.S. parts sales totaling more than $8 billion, and deferred or
avoided paying U.S. taxes totaling about $2.4 billion,” the report said.
It said the arrangement resulted in Caterpillar paying an effective tax rate of only 4 percent to 6 percent.
Caterpillar, in its 2016 annual report, said it is “vigorously contesting” the IRS demand. “We believe that the relevant transactions complied with applicable tax laws and did not violate judicial doctrines,” it stated.