The so-called "Patriot Tax" being pushed forward by the the United States Congress to stop companies reincoporating offshore in a bid to save taxes could be seen as a "bad law looking to patch up previous bad law", according to a leading Island businessman.

David Ezekiel, chairman of the Association of Bermuda International Companies (ABIC) formerly known as the International Companies Division of the Chamber of Commerce, said that the Patriot Tax issue was not Bermuda's problem, nor was it an issue on which Bermuda had to make a decision.

And he explained to Hamilton Rotary that the problem lay with the way US levied taxes on non-US profits and said that as far as he knew only two other nations did the same - the Philippines and Australia.

"There is so much misinformation out there in terms of what is happening with these companies that are relocating," he said on Tuesday. "Pretty much most of the relocation is to do not with shielding US income, but non-US income.

"The US is one of a handful of countries, I think the Philippines and Australia are only the other two, that actually tax non-domestic source income domestically. One can argue that this is bad law looking to patch up previous bad law. It's not our decision, it's not our problem."

There has been outrage in the US media and by US Senators against companies moving offshore to cut their tax bill.

Just last week lawmakers vowed to push for legislation that will halt companies reincorporating in tax friendly locations like Bermuda, dubbing it the "Repo Act".

The Senate Finance Committee leaders said they would aggressively press for legislation that stops US companies from moving their headquarters overseas to cut taxes.

"Our legislation ... is designed to put the brakes on the potential rush to move US corporate headquarters to tax havens," said panel chairman Max Baucus, of Montana who along with Charles Grassey of Iowa is spearheading the campaign.

This year US legislators have introduced two bills to the House of Representatives aimed at stopping US companies from relocating offshore, particularly to Bermuda.

The bills have been proposed by by Rep. Richard Neal and Rep. Scott McInnis and several American legislators have indicated they will put forward further bills, including Sen. Paul Wellstone and Sen. John Kerry.

In essence, the bills aim to levy US taxes on all income - including foreign revenues and sales - earned by corporations that reincorporate outside of the US.

The debate has largely focused on Bermuda-based companies such as Tyco, Global Crossing, Ingersoll-Rand and a company which has not yet "redomesticated", Stanley Works.

Last week Weatherford International Ltd and Leucadia National Corporation also announced plans to move to Bermuda to save taxes.

Sen. Baucus said he plans to bring the bill up for a vote soon and added he was "quite confident" the legislation can be passed into law this year to reduce occurrences of the practice. But after remaining quiet during the year, just recently Bermuda has been fighting back against the bad Press with Premier Jennifer Smith stating that she did not expect other countries to tell Bermuda how to collect their taxes.

In an interview with The Royal Gazette this week she said: "We don't expect other countries to tell us how we should collect our tax."

Mr. Ezekiel joined in the counter-attack by telling Rotarians: "What international business is not, as many of you know, is a series of brass plate companies set up here. We have been reading, mainly in the US press about paper companies. Well there are a number of paper companies, but that is not Bermuda's bread and butter.

"Bermuda's bread and butter is the physical presence of companies that are located here. There are about 12,500 international companies in Bermuda of which 3 percent, about 372 have a physical presence. That 3 percent provides over 80 percent of the income that Bermuda earns from international business. The income, according to the last Archer reports was $1 billion. Our bread and butter is not what you read. The Stanley Works Tools of the world coming here and paying the Government $27 grand and doing nothing."

He said out of the billion dollars a year earned in Bermuda, about $405 million of that was paid out in wages, about $250 million on professional banking fees and other fees, and about $222 million went to other companies, such as restaurants, taxi drivers, dry cleaners etc.

And he added that 3,000 people were directly employed in international business, of which 2,000 are Bermudian, plus another 14,500 jobs were in some way impacted by international business.

He added: "Whether they came and went is really of no great moment at all. The fact that they chose to come, is their decision, the fact that the US system either allows them or forces them to do it, is their problem.

"It is not something that Bermuda did to enable these companies to come here."

He said that Bermuda's tax code has been the same for 100 years and 50 years before international business started.

He added: "We haven't put anything into place to enable movement. But, we need to remind people, free country, free world."

He said that in Bermuda companies work within the rules and are fine until the rules change.

He added: "And we have got enough legislators and politicians, sable rattlers doing that in the US now. Because we all know with most politicians, they never let facts get in the way of a good position."

He also pointed to Bermuda's strong know-your-customer attitude and said if someone comes to Bermuda with the right credentials and the right background, they are allowed to stay.

But he added: "I don't think we should get deflective, I don't think we should get defensive. We have what we have because we have worked damn hard. If there are reasons to change the system of taxation because of internal constraints, that's fine."

He added: "I don't think we should be in a position of having us taught by someone else as to how we should or how we shouldn't structure our taxes."