Bermuda's business community yesterday reacted cautiously to the threat of new tax legislation from Washington, which would target companies that move to foreign countries in order to avoid tax on non-US earnings.

The reaction followed an announcement yesterday that tough new legislation - which is likely to be called the Corporate Expatriation Bill -had been introduced in Washington by Democratic Representative Richard Neal.

David Ezekiel, head of the Chamber of Commerce's Association of Bermuda International Companies (ABIC) said although the legislation would have some bearing on the Island, he said he had not yet seen the draft of the legislation: "It is tough to say without having seen it. It depends on its effect; how widely it casts its net."

Mr. Ezekiel said that if the aim of the latest legislation was to stop companies moving their place of incorporation to Bermuda for tax reasons - as indicated by its targeting of companies Ingersoll-Rand and Stanley Works which have recently moved to reincorporate on the Island - it would have minimal impact.

Mr. Ezekiel continued: "This is not where our bread and butter is," he said, and added that the Island gains the most benefit from those companies who do have a physical presence in Bermuda from which to carry out business. But he conceded that the drafted legislation will have some impact.

Mr. Ezekiel concluded: "This is not a time to panic; we have stood challenges like this before. This is free enterprise and overall we have a strong industry that will stand most tests."

Mr. Ezekiel stressed that a "wait and see" attitude should be adopted on the matter.

Wendy Davis-Johnson, director of global communications for the ACE group of companies, said: "We are aware of the legislation introduced by Congressman Neal and we want to study it thoroughly. Based on the descriptive material provided by his (Mr. Neal's) office, the legislation does not apply to ACE."

Mrs. Davis-Johnson said that ACE was established in Bermuda in 1985 and never "redomesticated" from the US to Bermuda. She said companies which have "redomesticated" seem to be the target of this latest legislation.

She added that ACE - which has 250 employees on the Island, 75 percent of which are Bermudians - has "substantial business activities in Bermuda".

Although XL did not comment on the legislation, it has - like ACE - always been a Bermuda-based company; not a company that moved here from the US.

BIBA did not respond to calls from The Royal Gazette.