WASHINGTON (MarketWatch) — Caterpillar Inc. used a Swiss affiliate to avoid paying $2.4 billion in U.S. taxes between 2000 and 2012, a report from Senate Permanent Subcommittee on Investigations Chairman Carl Levin said Monday.

The U.S. manufacturing giant CAT, -0.96% used its wholly owned Swiss affiliate CSARL to shift $8 billion in profits from the U.S. to Switzerland to take advantage of a special 4% to 6% corporate tax rate negotiated with the Swiss government, according to the results of a nine-month-long investigation by the subcommittee. CSARL sells replacement parts to markets outside the U.S.

Sen. Carl Levin Robert Schroeder/MarketWatch

Speaking to reporters on Monday, Michigan Democrat Levin said the subcommittee doesn’t reach judgments about whether companies broke tax laws. But he said tax avoidance must be countered forcefully by the IRS and by Congress.

“I’m about as strong a supporter of manufacturing as you’ll find in Washington,” Levin said. “But this investigation demonstrates just how shifting profits to a tax haven is not just the province of high-tech companies.”

Levin’s subcommittee last May blasted Apple Inc. for what lawmakers said was using gimmicks to avoid paying taxes. Testifying before the subcommittee, Apple CEO Tim Cook said the company pays all the taxes it owes.

The subcommittee’s ranking Republican, John McCain of Arizona, did not put his name on Levin’s report. A representative for McCain, who has worked with Levin on past investigations, didn’t return a message on Monday. But a spokesman told The Wall Street Journal last week McCain doesn’t believe Caterpillar’s tax practices are as “egregious” as Levin does.

Caterpillar defended itself in testimony released late Monday.

“We comply with the tax laws enacted by Congress, by the states and by all of the many jurisdictions in which we conduct business,” said Julie Lagacy, vice president of Caterpillar’s financial services division.

Lagacy also defends CSARL, saying: “If any well-advised business decided to expand today from serving purely domestic markets to serving global markets, it would establish a structure that looks like the current CSARL structure.”

The subcommittee report charges that beginning in 1999, Peoria, Ill.-headquartered Caterpillar paid PricewaterhouseCoopers more than $55 million to put in place a tax strategy built around redirecting taxable profits to Switzerland from sales of Caterpillar-branded replacement parts made by third parties.

PricewaterhouseCoopers said in a statement Monday: “Our advice to Caterpillar and its external counsel 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...We stand by the work we did for them.”

A staff member said the subcommittee doesn’t have 2013 data yet for Caterpillar.

Levin’s subcommittee will hold a hearing about Caterpillar’s offshore tax strategy on Tuesday morning. Among those scheduled to testify are Lagacy and Caterpillar Chief Tax Officer Robin Beran. Also scheduled are PricewaterhouseCoopers Managing Director Steven Williams and James Bowers, a tax partner at the firm.

Under U.S. tax law, companies are required to pay corporate income tax on profits wherever they are earned. But U.S. code allows companies to defer tax payments on overseas income if they don’t bring proceeds back to the U.S.

Levin’s subcommittee has made combating tax evasion a priority. In February, it said that Swiss banking giant Credit Suisse helped more than 22,000 U.S. customers avoid paying U.S. taxes by opening accounts worth as much as $12 billion at their peak.

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