Caterpillar skirted $2.4 billion in taxes, Senate report says
From 2000 to 2012, Peoria, Ill.-based Caterpillar moved $8 billion that it earned in the United States to Switzerland after negotiating an effective tax rate of 4 percent with the Swiss government.
By Danielle Douglas
Washington Post
March 31, 2014
Industrial manufacturer Caterpillar shifted billions of dollars in profits from the United States to Switzerland over a decade to avoid paying $2.4 billion in U.S. taxes, according to a Senate report due out Tuesday.
The report from the Senate permanent subcommittee on investigations is the latest in a series of probes into multinational corporations, including Apple, Microsoft and Hewlett-Packard, accused of hiding portions of their global profits from taxation.
Lawmakers have argued that tax shelters are an outgrowth of a broken corporate tax code and allow homegrown companies to defer taxes on overseas income indefinitely if they don’t bring the proceeds home. But lawmakers also say the failings of the tax system are no excuse for companies not to pay their fair share.
“Caterpillar is an American success story, but it is also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying U.S. taxes,” Sen. Carl Levin (D-Mich.), chairman of the subcommittee, said during a news conference Monday.
The subcommittee staff found that from 2000 to 2012, Peoria, Ill.-based Caterpillar moved $8 billion it earned in the United States to Switzerland after negotiating an effective tax rate of 4 percent with the Swiss government. Caterpillar redirected the money it made selling replacement parts for its machines to Swiss affiliate CSARL, according to the report.
CSARL sells parts to Caterpillar’s foreign dealers and pays the parent company a royalty equal to about 15 percent of the parts profits while keeping the remaining 85 percent on its books in Switzerland. Investigators say that Caterpillar started logging a majority of its profits from replacement parts in Switzerland in 1999, although no personnel or business activities were moved to that country.
At least 70 percent of the
replacement-parts business — manufacturing, warehousing and distribution — is housed in the United States. There are nearly 5,000 U.S. employees handling the manufacturing, and only 65 workers doing the same in Switzerland, according to the report.
Caterpillar officials said that the investigation looked at only one aspect of its global operations, presenting a limited picture of the company’s tax contribution in the United States. Caterpillar has paid about $600 million a year in federal taxes during the past three years, the company said.
“Caterpillar’s effective income tax rate averages about 29 percent, which is one of the highest for a U.S. multinational manufacturing company,” Julie Lagacy, vice president of the financial services division at Caterpillar, said in a statement. “We comply with the tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business.”
Lagacy said Caterpillar’s business structure drives its tax structure. But the subcommittee contends that maximizing profits at the expense of U.S. taxpayers has played a much greater role.
It wasn’t always like this. PricewaterhouseCoopers, hired by Caterpillar as a tax consultant and auditor, devised the tax strategy in 1999, when 85 percent of the manufacturer’s profits were booked in the United States, according to investigators. The accounting giant was paid more than $55 million to find ways to lower the tax bill, the report said.
“When Caterpillar and its tax advisers launched this tax-
avoidance scheme, almost nothing changed in the real world,” Levin said. “But in the fantasyland that is international tax law, tax lawyers waved a magic wand to make millions of dollars in U.S. taxes disappear.”
The subcommittee also questioned the ethics of PricewaterhouseCoopers acting as Caterpillar’s accountant at the same time it was auditing the company.
Caroline Nolan, a spokeswoman for PricewaterhouseCoopers, dismissed the accusation of impropriety, saying that the company has maintained independence at all times. She said the firm was compensated for six years of extensive work to help Caterpillar improve its operations.
“We stand by the work we did for them,” Nolan said in an e-mail. “Our advice . . . helped Caterpillar evaluate how best to organize its expanding global operations, aligning the economics of such global operations with carefully considered U.S. tax policies.”
In February, Caterpillar revealed in a Securities and Exchange Commission filing that the Internal Revenue Service notified the company that it owes additional federal taxes from “certain non-U.S. operations and foreign tax credits.”
Subcommittee staff began looking into practices at Caterpillar after a former employee, Daniel Schlicksup, sued the company in 2009. Schlicksup, who served as global tax strategy manager at Caterpillar, said he questioned the company about the risks of its Swiss tax strategy and was forced to transfer elsewhere in the firm out of retaliation. Caterpillar denied the allegation in the case, which was settled in 2012.
Executives from Caterpillar and PricewaterhouseCoopers are scheduled to testify Tuesday at a subcommittee hearing on the report. Although Levin said the report was a bipartisan effort, the subcommittee’s ranking Republican, Sen. John McCain (Ariz.), did not endorse the findings. McCain declined to comment, but his office said he would address the issue at the hearing.
Showing posts with label tax evasion. Show all posts
Showing posts with label tax evasion. Show all posts
Tuesday, April 01, 2014
Monday, May 27, 2013
Who pays taxes? Employees replace corporations in big shift over past decades
"We should not be so mad at Apple for doing what the law allows. We should be mad that the law allows Apple and other companies to keep billions of dollars of cash offshore and out of the government coffers, where it could be helping the unemployed and our crumbling infrastructure and such. Another thing we can get mad about is how the "corporate tax reform" that Cook and other corporate leaders are always banging on about will actually serve to make it so companies pay even less in taxes than they do now."
The 1 Chart That Reveals Just How Grossly Unfair The U.S. Tax System Has Become
Mark Gongloff
huffingtonpost.com
05/22/2013 Updated: 05/23/2013
Click to enlarge.
Notice the beige stripe that is shrinking steadily? That stripe is the percentage corporate taxes contribute to total federal revenue. And notice the olive-green stripe that has swollen to be larger than the beige stripe used to be? That is the contribution of payroll taxes to federal revenue.
What this shows is how dramatically corporate tax contributions have shrunk in the past several decades, and how our personal taxes have risen to fill the gap. Payroll taxes now make up 35 percent of all federal government tax receipts, up from 11 percent in 1950. Corporate income taxes, meanwhile, now make up less than 10 percent of federal revenue, down from about 26 percent in 1950...
Assuming companies pay half of the payroll taxes in this chart, the total tax burden for individual Americans is ...about 63 percent of total federal revenue...that is up from about 45 percent in 1950.
The 1 Chart That Reveals Just How Grossly Unfair The U.S. Tax System Has Become
Mark Gongloff
huffingtonpost.com
05/22/2013 Updated: 05/23/2013
Click to enlarge.Notice the beige stripe that is shrinking steadily? That stripe is the percentage corporate taxes contribute to total federal revenue. And notice the olive-green stripe that has swollen to be larger than the beige stripe used to be? That is the contribution of payroll taxes to federal revenue.
What this shows is how dramatically corporate tax contributions have shrunk in the past several decades, and how our personal taxes have risen to fill the gap. Payroll taxes now make up 35 percent of all federal government tax receipts, up from 11 percent in 1950. Corporate income taxes, meanwhile, now make up less than 10 percent of federal revenue, down from about 26 percent in 1950...
Assuming companies pay half of the payroll taxes in this chart, the total tax burden for individual Americans is ...about 63 percent of total federal revenue...that is up from about 45 percent in 1950.
Wednesday, August 08, 2012
Mitt Romney's "Son of Boss" reveals truth about Romney and taxes
Did Romney enable company's abusive tax shelter?
By Peter C. Canellos and Edward D. Kleinbard
August 8, 2012
(CNN)
Mitt Romney's refusal to release tax returns in the critical years of his income accumulation has done little to dispel the legitimate concern that arises from hints buried in his scant disclosure to date: Did he augment his wealth through highly aggressive tax stratagems of questionable validity?
Opinion: Why won't Romney release more tax returns?
One relevant line of inquiry, largely ignored so far, is to examine what exists in the public record regarding his attitude toward tax compliance and tax avoidance. While this examination is hampered because his dealings through his private equity company, Bain Capital, are kept shrouded, there are other indicators.
A key troubling public manifestation of Romney's apparent insensitivity to tax obligations is his role in Marriott International's abusive tax shelter activity.
Romney has had a close, long-standing, personal and business connection with Marriott International and its founders. He served as a member of the Marriott board of directors for many years. From 1993 to 1998, Romney was the head of the audit committee of the Marriott board.
During that period, Marriott engaged in a series of complex and high-profile maneuvers, including "Son of Boss," a notoriously abusive prepackaged tax shelter that investment banks and accounting firms marketed to corporations such as Marriott. In this respect, Marriott was in the vanguard of a then-emerging corporate tax shelter bubble that substantially undermined the entire corporate tax system.
Son of Boss and its related shelters represented perhaps the largest tax avoidance scheme in history, costing the U.S. many billions in lost corporate tax revenues. In response, the government initiated legal challenges that resulted in complete disallowance of the losses claimed by Marriott and other corporations.
In addition, the Son of Boss transaction was listed by the Internal Revenue Service as an abusive transaction, requiring specific disclosure and subject to heavy penalties. Statutory penalties were also made more stringent to deter future tax shelter activity. Finally, the government brought successful criminal prosecutions against a number of individuals involved in Son of Boss and related transactions not associated with Marriott, including principals at major law and accounting firms.
In his key role as chairman of the Marriott board's audit committee, Romney approved the firm's reporting of fictional tax losses exceeding $70 million generated by its Son of Boss transaction. His endorsement of this stratagem provides insight into Romney's professional ethics and attitude toward tax compliance obligations... Editor's note: Peter C. Canellos, a lawyer, is former chair of the New York State Bar Association Tax Section. Edward D. Kleinbard is a professor at Gould School of Law at the University of Southern California. He is the former chief of staff of Congress's Joint Committee on Taxation.
By Peter C. Canellos and Edward D. Kleinbard
August 8, 2012
(CNN)
Mitt Romney's refusal to release tax returns in the critical years of his income accumulation has done little to dispel the legitimate concern that arises from hints buried in his scant disclosure to date: Did he augment his wealth through highly aggressive tax stratagems of questionable validity?
Opinion: Why won't Romney release more tax returns?
One relevant line of inquiry, largely ignored so far, is to examine what exists in the public record regarding his attitude toward tax compliance and tax avoidance. While this examination is hampered because his dealings through his private equity company, Bain Capital, are kept shrouded, there are other indicators.
A key troubling public manifestation of Romney's apparent insensitivity to tax obligations is his role in Marriott International's abusive tax shelter activity.
Romney has had a close, long-standing, personal and business connection with Marriott International and its founders. He served as a member of the Marriott board of directors for many years. From 1993 to 1998, Romney was the head of the audit committee of the Marriott board.
During that period, Marriott engaged in a series of complex and high-profile maneuvers, including "Son of Boss," a notoriously abusive prepackaged tax shelter that investment banks and accounting firms marketed to corporations such as Marriott. In this respect, Marriott was in the vanguard of a then-emerging corporate tax shelter bubble that substantially undermined the entire corporate tax system.
Son of Boss and its related shelters represented perhaps the largest tax avoidance scheme in history, costing the U.S. many billions in lost corporate tax revenues. In response, the government initiated legal challenges that resulted in complete disallowance of the losses claimed by Marriott and other corporations.
In addition, the Son of Boss transaction was listed by the Internal Revenue Service as an abusive transaction, requiring specific disclosure and subject to heavy penalties. Statutory penalties were also made more stringent to deter future tax shelter activity. Finally, the government brought successful criminal prosecutions against a number of individuals involved in Son of Boss and related transactions not associated with Marriott, including principals at major law and accounting firms.
In his key role as chairman of the Marriott board's audit committee, Romney approved the firm's reporting of fictional tax losses exceeding $70 million generated by its Son of Boss transaction. His endorsement of this stratagem provides insight into Romney's professional ethics and attitude toward tax compliance obligations... Editor's note: Peter C. Canellos, a lawyer, is former chair of the New York State Bar Association Tax Section. Edward D. Kleinbard is a professor at Gould School of Law at the University of Southern California. He is the former chief of staff of Congress's Joint Committee on Taxation.
Saturday, October 22, 2011
In 1952, corporate taxes were 6.1% of GDP; in 2009, corporate taxes were 1% of GDP
50 Amazing Numbers About the Economy
By Morgan Housel
The Motley Fool
October 21, 2011
...In 1952, corporate taxes were 6.1% of GDP, and employment taxes were 1.8% of GDP.
In 2009, corporate taxes were 1% of GDP, and employment taxes were 6.3% of GDP...
By Morgan Housel
The Motley Fool
October 21, 2011
...In 1952, corporate taxes were 6.1% of GDP, and employment taxes were 1.8% of GDP.
In 2009, corporate taxes were 1% of GDP, and employment taxes were 6.3% of GDP...
Monday, May 16, 2011
Iowa conservative group hosting potential GOP candidates accepted $3 million in federal grants
Iowa conservative group hosting potential GOP candidates accepted $3 million in federal grants
By Associated Press
May 13, 2011
IOWA CITY, Iowa — A conservative group that has brought a string of potential presidential candidates to Iowa to lecture about the need to reduce government spending owes some of its past success to generous federal grants, which it has since rejected amid charges of hypocrisy.
The Family Leader has organized multicity forums for Reps. Michele Bachmann and Ron Paul, former Minnesota Gov. Tim Pawlenty and former Sen. Rick Santorum. Each has called for reining in federal spending and talked about family values.
The same group received more than half of its funding from federal grants over a five-year period when it operated under a different structure as The Iowa Family Policy Center. The group was among those that benefited from former President George Bush’s faith-based initiative, which made it easier for social and religious organizations involved in community work to win federal funding.
The organization defends taking the grants, the bulk of which helped provide marriage mentoring for couples, but decided last year to turn down the final $550,000 in grant money and operate free of government involvement. In all, the group had accepted more than $3 million in federal grants since 2004...
By Associated Press
May 13, 2011
IOWA CITY, Iowa — A conservative group that has brought a string of potential presidential candidates to Iowa to lecture about the need to reduce government spending owes some of its past success to generous federal grants, which it has since rejected amid charges of hypocrisy.
The Family Leader has organized multicity forums for Reps. Michele Bachmann and Ron Paul, former Minnesota Gov. Tim Pawlenty and former Sen. Rick Santorum. Each has called for reining in federal spending and talked about family values.
The same group received more than half of its funding from federal grants over a five-year period when it operated under a different structure as The Iowa Family Policy Center. The group was among those that benefited from former President George Bush’s faith-based initiative, which made it easier for social and religious organizations involved in community work to win federal funding.
The organization defends taking the grants, the bulk of which helped provide marriage mentoring for couples, but decided last year to turn down the final $550,000 in grant money and operate free of government involvement. In all, the group had accepted more than $3 million in federal grants since 2004...
Friday, February 12, 2010
Reid's Jobs Bill Includes Tax-Evasion Provisions
FEBRUARY 12, 2010
Reid's Jobs Bill Includes Tax-Evasion Provisions
Wall Street Journal
By MARTIN VAUGHAN And HENRY J. PULIZZI
WASHINGTON—Senate Majority Leader Harry Reid intends to use measures cracking down on offshore-tax evasion to pay for the cost of a $15 billion stimulus bill he wants to push through the Senate this month...
Reid's Jobs Bill Includes Tax-Evasion Provisions
Wall Street Journal
By MARTIN VAUGHAN And HENRY J. PULIZZI
WASHINGTON—Senate Majority Leader Harry Reid intends to use measures cracking down on offshore-tax evasion to pay for the cost of a $15 billion stimulus bill he wants to push through the Senate this month...
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