Whistleblowing and Caterpillar Inc.’s Swiss Tax Strategy

Amy Lysak; Richard Marmon; Edward J. Schoen

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Whistleblowing and Caterpillar Inc.’s Swiss Tax Strategy

Amy Lysak, Richard Marmon, and Edward J. Schoen

Rohrer College of Business, Rowan University, USA

Volume 17: 2020 pp. 237-250: ABSTRACT

This case describes the background of the whistleblower complaint, filed by Daniel Schlicksup, questioning the propriety of Caterpillar Inc.’s “Swiss tax strategy”. The Swiss tax strategy was recommended by its independent auditor, PricewaterhouseCoopers (PwC), and designed to transfer to a Swiss entity the profits earned on its sales of “purchased finished replacement parts” to foreign marketers. This strategy enabled Caterpillar to shift $8 billion in replacement parts sales to Switzerland and to avoid or defer paying U.S. taxes on that income. Daniel Schlicksup, a member of Caterpillar’s tax staff, filed an Internal Revenue Service (IRS) whistleblower complaint against Caterpillar and provided the IRS extensive documentation that served as the foundation for the IRS’s claim Caterpillar owed $2 billion in back taxes and penalties, potentially entitling Schlicksup to a huge whistleblower award ranging from $300 to $600 million. Careful review of this case facilitates student discussion, and enhances student understanding, of the wisdom and morality of Schlicksup’s whistleblowing activities.