US Patriot Tax Bill Falls At First Hurdle

by Mike Godfrey, Tax-News.com, Washington

20 May 2002

Following the failure of the US 'Patriot Tax' or 'Repo' Bill to even get off the starting blocks in Congress last week, a leading analyst has been quoted as observing that the furore in the United States may actually encourage companies to defect to low tax jurisdictions, rather than the other way around.

On Tuesday, Democrat Representative Charles Rangel attempted to piggyback the legislation onto another bill designed to give tax relief to married couples. However, due to opposition from some Republicans to the plans to remove the tax benefits of offshore reincorporation, the 'Patriot Tax' amendment to the code was thrown out, and the vote on the marriage tax bill postponed until this week.

This attempt to pass the bill via the back door has come as something of a surprise to many in Bermuda, who were reassured by Finance Minister, Eugene Cox's comments that a recent meeting with US lawmakers had gone well.

Meanwhile, a leading tax analyst with Lehman Brothers Inc. has told the Bermudian Royal Gazette that the outcry in America over companies choosing to reincorporate in Bermuda may have drawn the attention of other organisations to the potential benefits of the low tax jurisdiction.

Speaking to the Gazette last week, Robert Willens observed that, provided no legislation is passed in the meantime, heightened awareness of Bermuda's tax and other benefits could 'cause more and more companies to seriously consider expatriating'.

Following the announcement last week that Stanley Works' shareholders had voted to reincorporate in Bermuda (a move which has been temporarily postponed due to concerns that shareholders whose stake in the company forms part of their 401k plan may have been confused as to voting procedures), two other US companies have decided to make the move.

Leucadia National and Cooper Industries revealed last week that their shareholders have voted in favour of relocation to Bermuda.

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