Caterpillar Inc. has long used a subsidiary in Geneva, Switzerland, called Caterpillar SARL, to process sales and profits for international orders, and the IRS wants the heavy-machinery maker to pay a $2 billion tax bill on that business, according to The Wall Street Journal.
Although the company maintains that its Swiss strategy, which results in an effective tax rate there of as low as 4 percent, is legal, some Caterpillar employees have questioned the practice, which began in 1999, the Journal reports.
No civil or criminal charges have been filed, and a Caterpillar spokeswoman told the Journal that the company is “in the process of responding to the government’s concerns.”
Federal officials raided Caterpillar’s offices in March, and the outcome of the investigation could influence other U.S. companies’ tax strategies. Sweeping new tax law took effect Monday, partially aimed at persuading American companies to bring back their overseas cash holdings.