Caterpillar Inc. share price steady, accused by Senate investigative committee of “shifting” profits

A Senate investigative committee released a report today, revealing that 2.4 billion dollars in taxes were avoided to be paid by Caterpillar Inc. in the U.S. through a corporate restructuring, under which the company shifted most of its profits from overseas replacement-part sales to a subsidiary in Switzerland.

Caterpillar Inc., which is currently considered as the biggest manufacturer of heavy machinery in the world, was accused of using a Swiss affiliate to shift about 85% of its profits according to a report by the Democratic U.S. Senator Carl Levin. Mr. Levin said that 8 billion dollars in profits were shifted from the U.S. to Caterpillars Swiss affiliate, which will be the subject of a subcommittee hearing today.

As reported by Bloomberg, Mr. Levin said: “Nothing changed in the real world after that except Caterpillar’s tax bill. Caterpillar waved a magic wand to make billions of dollars in U.S. taxes disappear.”

Another part of his statement was cited by the Financial Times: “Caterpillar is an American success story that produces phenomenal industrial machines, but it is also a member of the corporate profit-shifting club that has shifted billions of dollars in profits offshore to avoid paying US taxes.”

The company made a response to the Committee report, saying that it has set up a “standard multinational business structure entirely consistent with the letter and spirit of U.S. tax law”. The executives of the company are also expected to testify at the hearing scheduled today. The executives of a company that helped Caterpillar – PricewaterhouseCoopers LLP will testify as well.

One of the tax lobbyists, who represent Caterpillar Inc. – Mr Kenneth Kies said in an interview for Bloomberg: “What Caterpillar did here is pretty routine U.S. multinational tax planning. This is not radical cutting-edge tax planning. This is pretty normal stuff.”

Caterpillar Inc. fell by 0.02% to $99.37 per share on Monday in New York, marking a one-year change of +14.26% and a market value of $63.38 billion. According to CNN Money, the 23 analysts offering 12-month price forecasts for Caterpillar Inc. have a median target of $98.00, with a high estimate of $122.00 and a low estimate of $85.00. The median estimate represents a -1.38% decrease from the last price of $99.37.