Senate Democrats Say Caterpillar Avoided $2.4 Billion In Taxes

toggle caption Jonathan Ernst/Reuters/Landov

At a Senate committee hearing on Tuesday, senior officials of Peoria, Ill.-based Caterpillar Inc. defended the company against accusations that it had used an affiliate in Switzerland to avoided paying some $2.4 billion in taxes over a 12-year period.

"Americans pay the taxes they owe and not more. And, as an American company, we pay the taxes we owe, not more," Julie Lagacy, vice president of financial services at Caterpillar, told a Senate panel on Tuesday.

"Caterpillar takes very seriously its obligation to follow tax law and pay what it owes," she said.

NPR's Jim Zarroli reports on All Things Considered that "Caterpillar was the focus of the hearing as part of an ongoing effort by the subcommittee to highlight different methods of tax avoidance by companies."

Although the committee report does not accuse Caterpillar of breaking the law, it does raise questions about its tax strategy.

Levin said the company had "waved a magic wand" to make its tax liabilities disappear, saying it sought to "shift taxes onto the backs of middle-class families."

He said it was up to the Internal Revenue Service to determine if Caterpillar violated the law.

Tuesday's testimony comes amid Republican lawmakers' defense of Caterpillar, the world's largest maker of construction and mining equipment.

GOP Sen. Rand Paul is among those who say the company is within the law and working in the best interests of its shareholders.

"We've got the wrong people on trial here," Paul said. "The tax code needs to be on trial here."

Sen. Rob Portman America's high corporate tax rate drives companies like Caterpillar to keep move their operations abroad. He said it was putting U.S. companies at a competitive disadvantage.

"I'm very concerned about it," Portman said. "In my home state of Ohio we have companies that have left our state to be domiciled somewhere else because of tax laws."

Last year, Levin's subcommittee also took Apple Inc. to task for maintaining "a complex web of offshore entities" to avoid paying billions in U.S. income taxes, amounting to about $10 billion in tax avoidance over four years.

At the time, Arizona Sen. John McCain had strong words for Apple and other companies that had sought to avoid U.S. taxes, saying they were "purposefully depriving the American people of revenue."

However, McCain, the ranking Republican on the committee, declined to sign on to Levin's report, telling Bloomberg News earlier this week that Caterpillar's actions weren't "on the level" of Apple's.

Apple CEO Tim Cook defended his company's actions. He called on Congress to lower the corporate tax rate.