According to the US Senate Permanent Subcommittee on Investigations, Illinois-based heavy-equipment manufacturer Caterpillar has taken advantage of a special corporate tax deal negotiated with the Swiss authorities to avoid paying $2.4 billion in US taxes.

Committee chairman Carl Levin said that the company paid Swiss authorities $55 million instead. Mr Levin said: “That tax strategy depends on the company making the case that its parts business is run out of Switzerland instead of the USA, so it can justify sending 85% or more of the parts profits to Geneva.”

Caterpillar, which recorded sales worth $56 billion last year, used to book its world-wide sales of parts — mostly made in the USA — on its US tax report. However, it shifted at least 85% of its parts profits to Switzerland in 1999. In a statement, Caterpillar’s vice-president for financial services — Julie Lagacy — said that the company complies with US tax laws. “Caterpillar takes very seriously its obligation to follow tax law and pay what it owes. In fact, its effective income tax rate averages about 29%, which is one of the highest for a US multi-national manufacturing company.”