The Big Number: Caterpillar Inc. Strikes a Deal With Switzerland

A Senate report shows the company avoided paying $2.4 billion in taxes by shifting profits to an affiliate.
3:00 | 04/01/14

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Transcript for The Big Number: Caterpillar Inc. Strikes a Deal With Switzerland
Okay. It's Tuesday April firsts the New York markets are open in today's big number. Is 2.4 billion dollars that's how much in taxes that caterpillar. -- -- -- Since 2000 by shifting profits to an affiliate in Switzerland this according to democratic senator Carl Levin of Michigan. Hi everyone I'm Michelle Franzen a New York for more on this I want to bring in Lauren -- from Yahoo! finance. Lauren talk us through senator -- investigation of caterpillar -- -- -- that are -- how are they able to avoid. Paying these taxes. Share so what caterpillar and it turns out had done. It did they -- -- head and they negotiated the deal was Switzerland Japan tax rate of 46%. A lot less than their effective tax rate in the US which is 29%. So -- had that deal they knew the profits for their parts business over to a Swiss subsidiary. That allow them to avoid paying 2.4 billion dollars in US taxes as you mentioned them all they knew the profits for the parts business to this with subsidiary. They actually move the parts business that was still mainly based -- west that that was a strategy that they used. I ate and ate it went on over the last thirteen years of arable two -- -- did is that couple billion dollars and. -- as we look -- live on that hearing. It's hard to imagine a more American company between caterpillar it's certainly stationed in the heartland. Absolutely it's it's been around for 85 year is its tractor -- in machines and equipment -- Helped fuel the US economy over -- -- -- -- gains. I angled ball we've focused on these tax strategies for a lot -- tech companies and newer companies caterpillar is. One this kind of a spotlight its and manufacturer and a construction company and and more at bats. New bricks and mortar -- -- -- -- -- kind of a business and yes very American. Senator Carl Levin says whether or not these tax strategies are appropriate that's the question for the public the question is. Is it tolerable and I don't think it is now we should point out that they're not necessarily saying caterpillar did anything illegal right Karen. That's absolutely right so -- is not drawing any conclusions about illegality at this. Because something that we've seen is that a lot of these companies have been able to avoid -- -- and perfectly legal -- and in fact caterpillar has said. That this was all done prudently it was all done legally and that it was very typical of what US companies. Do and just to drive that point home US corporations hold one point 95. Trillion dollars in cash overseas and some of these low tax countries and not to close to 12% increase from 2012 to 2013. And of course as we listen from caterpillar officials today -- have already come out. Are releasing a statement the vice president of caterpillar saying that they pay their taxes 29%. In fact and that they -- they take this very seriously. Yeah and that's right 29% as their tax rate -- last. Meanwhile the tax rate in Nate in -- -- land where they have this deal worked out is 46%. Which is. Lower on the profits that they admitted there this this thing goes tick -- kind of a problem in the US corporate tax cut which is what many say. This is really about which is that -- company can defer paying taxes on its. Foreign profits until they bring that money home so it's no wonder that so many of those profits. Stay overseas so -- give me an idea what precedent though could this could this -- other companies. Well it's certainly and that puts companies in the spotlight this is actually continuation ends at hearings that we've -- where this panel has brought to -- -- different strategies. They companies that used to avoid paying US taxes other companies -- had been in the hot seat include apple. Hewlett-Packard. Microsoft. As I mentioned before those are attacked companies now they're showing that this also -- says a company and -- different industry at different sector entirely. And it's perhaps a broader problem land. But as I said many say this is a problem with the tax code and -- tax reform needs to be changed. -- champion lowering the US corporate tax rates and that more companies -- -- incentivized to bring their profits home. But -- of tax -- -- perhaps there's not much that can be done. -- -- from Yahoo! finance thank you for joining us we will watch all of this unfold and you of course. Can keep up with the latest headlines right here on You've been watching the big number I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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