Executives of Caterpillar and PricewaterhouseCoopers

Executives of Caterpillar and PricewaterhouseCoopers, the accounting and auditing firm that helped devise the strategy, said the change aligned machinery-parts management with the manufacturer's growing international business.
" I want to emphasize Caterpillar complies with the U.S. tax laws, and we pay everything we owe," said Julie Lagacy, vice president of the company's finance services division. She stressed that the company pays an effective tax rate that averages about 29%, higher than at some U.S. firms.
Levin, however, highlighted internal documents about Caterpillar's plan to transfer parts-management to a "low-tax" jurisdiction. He also cited a 2008 e-mail in which PwC executives who helped devise the strategy wrote: "We are going to have to create a story that will put some distance between them and parts ... to retain the (tax) benefit. Get ready to do some dancing."
"It was a tax deal," said Levin, arguing the U.S. Treasury and taxpaying Americans were harmed.
Committee Republicans insisted the only villain was the tax code.
"There's no doubt that that's a factor in moving operations overseas" and "parking those profits overseas rather than bringing them back to be subjected to a 35% corporate tax rate," said Sen. John McCain, R-Ariz., the panel's ranking GOP member. "This makes a compelling argument for broader tax reform in order to ensure our tax code is fair, competitive and a vehicle for economic growth."
Sen. Ron Johnson, R-Wis., questioned the hearing testimony of legal experts who expressed skepticism about Caterpillar's tax strategy. If the manufacturer were suspected of doing anything improper to reduce its tax bill, that should be addressed by the IRS or U.S. Tax Court, "not Congress," he said.
Sen. Rand Paul, R-Ky., went further, arguing that the subcommittee should give Caterpillar an American business award "instead of vilifying people for legal behavior."