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Caterpillar Stock Slides After Report Accuses It of Tax Fraud
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On Wednesday, shares of manufacturing giant Caterpillar Inc. (CAT - Free Report) are sliding, down about 1.5% in late-morning trading after a new report, commissioned by the government, accused the company of tax and accounting fraud, according to The New York Times.
The report, which the Times had access to and viewed, though it has not been made public or made available to Caterpillar, focused on the company’s offshore tax arrangement, and discovered that the company did not pay U.S. taxes on billions of dollars, primarily from its Swiss units and affiliates. The Times also said it wasn't clear which government agency commissioned the report.
“Caterpillar did not comply with either U.S. tax law or U.S. financial reporting rules,” Leslie A Robinson, an accounting professor at the Tuck School for Business at Dartmouth College and author of the report wrote, according to the Times. “I believe that the company’s noncompliance with these rules was deliberate and primarily with the intention of maintaining a higher share price. These actions were fraudulent rather than negligent.”
A Caterpillar spokeswoman told the Times that the company was not provided with a copy of the report, and wouldn’t comment any further.
For years, Caterpillar has defended its tax strategies, saying what they utilize are practical and lawful among big U.S. corporations; they have also helped save the company billions of dollars. But since a 2014 Senate hearing, Caterpillar’s tax strategies have been under the microscope of government investigators, notes the Times. The hearings found that the manufacturer cut its tax bill by $2.4 billion over 13 years, moving its earnings out of the U.S. and into a Swiss subsidiary.
Caterpillar is also currently contesting an I.R.S demand that it pay $2 billion in taxes and penalties for profits to the subsidiary between 2007 and 2012.
Apparently, federal officials searched three Caterpillar locations last week to execute a search and seizure warrant, including its headquarters in Peoria, Illinois. Caterpillar said it was cooperating with law enforcement.
Multinational corporations like Caterpillar, as well as Apple (AAPL - Free Report) and Pfizer (PFE - Free Report) . are hit with a 35% tax rate in the U.S., which is much higher than in other developed economies. But, “they are permitted to defer the taxes owed on the profits generated offshore until they bring those earnings back to the States, a process known as repatriation,” notes the Times.
President Donald Trump has proposed that corporations with large amounts of cash in overseas accounts should be able to return the income at a 10% rate.
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Caterpillar Stock Slides After Report Accuses It of Tax Fraud
On Wednesday, shares of manufacturing giant Caterpillar Inc. (CAT - Free Report) are sliding, down about 1.5% in late-morning trading after a new report, commissioned by the government, accused the company of tax and accounting fraud, according to The New York Times.
The report, which the Times had access to and viewed, though it has not been made public or made available to Caterpillar, focused on the company’s offshore tax arrangement, and discovered that the company did not pay U.S. taxes on billions of dollars, primarily from its Swiss units and affiliates. The Times also said it wasn't clear which government agency commissioned the report.
“Caterpillar did not comply with either U.S. tax law or U.S. financial reporting rules,” Leslie A Robinson, an accounting professor at the Tuck School for Business at Dartmouth College and author of the report wrote, according to the Times. “I believe that the company’s noncompliance with these rules was deliberate and primarily with the intention of maintaining a higher share price. These actions were fraudulent rather than negligent.”
A Caterpillar spokeswoman told the Times that the company was not provided with a copy of the report, and wouldn’t comment any further.
For years, Caterpillar has defended its tax strategies, saying what they utilize are practical and lawful among big U.S. corporations; they have also helped save the company billions of dollars. But since a 2014 Senate hearing, Caterpillar’s tax strategies have been under the microscope of government investigators, notes the Times. The hearings found that the manufacturer cut its tax bill by $2.4 billion over 13 years, moving its earnings out of the U.S. and into a Swiss subsidiary.
Caterpillar is also currently contesting an I.R.S demand that it pay $2 billion in taxes and penalties for profits to the subsidiary between 2007 and 2012.
Apparently, federal officials searched three Caterpillar locations last week to execute a search and seizure warrant, including its headquarters in Peoria, Illinois. Caterpillar said it was cooperating with law enforcement.
Multinational corporations like Caterpillar, as well as Apple (AAPL - Free Report) and Pfizer (PFE - Free Report) . are hit with a 35% tax rate in the U.S., which is much higher than in other developed economies. But, “they are permitted to defer the taxes owed on the profits generated offshore until they bring those earnings back to the States, a process known as repatriation,” notes the Times.
President Donald Trump has proposed that corporations with large amounts of cash in overseas accounts should be able to return the income at a 10% rate.
Which Stocks are Zacks Experts Talking About?
Stocks in today's headlines may be tempting buys, but how would you like a sneak peek at the stocks Zacks experts recommend? Starting today, for the next month, you can follow all of Zacks' private buys and sells in real time. You can track value and momentum stocks, ETFs, stocks under $10, options moves, insider trades, and stocks set to report positive earnings surprises (we've called them with 80%+ accuracy). Click here for all Zacks trades >>