Caterpillar contests $2 billion tax penalty

Caterpillar Inc is contesting the US$2.3 billion tax and penalties proposed by the U.S. Internal Revenue Service (IRS), and has said that the case would not have a material impact on its finances and operations.

The company recently filed its 10-K report – an annual report required by the U.S. Securities and Exchange Commission – that gives a comprehensive summary of the company’s financial performance for 2017. 

Last year the IRS challenged the company’s taxes for 2007-2012 and federal law enforcement officials searched three of its facilities in connection with an investigation related to profits earned by a Swiss parts subsidiary, Caterpillar SARL.

A US Senate committee report concluded that the company had shifted profits abroad and had deferred or avoided taxes.

In a filing Caterpillar said: “We currently believe the ultimate disposition of this matter will not have a material adverse effect on our consolidated financial position, liquidity or results of operations.”

The document released by the company showed that Caterpillar Construction Industries’ sales were $19.13 billion in 2017, compared with $15.61 billion in 2016. The increase was due to higher sales volume and favorable price realisation.

The filing also shows that sales in Asia/Pacific were higher as a result of an increase in end-user demand, primarily in China, stemming from increased building construction and infrastructure investment. The company said thet expect 2018 sales in China to be higher due to continued building construction and infrastructure investment with a strong first half and some tempering later in the year.