Is is said that there is no such thing as bad publicity, but yesterday's front page story in the New York Times - “US companies file in Bermuda to slash tax bills” is surely the exception that makes the rule.

Some weeks ago, in the wake of a series of negative press reports about Bermuda relating to the collapse of Enron and Global Crossing Ltd. and the difficulties facing Tyco and Elan International, this newspaper warned that Bermuda needed to mount a media counter-attack.

The need for a full response became more pronounced yesterday when the New York Times - arguably America's most influential newspaper, if not the world's - ran its story.

The story, quoted at length in today's Royal Gazette, described how one Bermuda-based company had moved from its New Jersey headquarters to Bermuda and as a result paid $27,000 per year to Government instead of $40 million in corporate income taxes to the United States.

Last week, another manufacturing company, the hardware company Stanley Works, announced it was moving to Bermuda as well. The primary reason, the company said, was to reduce its tax bill. And it said its profits would be $30 million higher in the next quarter as a result.

Bermuda has spent decades trying to shed the tax-haven label. Yesterday, it came back with a vengeance.

The New York Times also added a new twist to the question, by quoting an expert who said the issue for companies was, quite simply, patriotism or profit.

Investors and stock analysts may prefer reducing taxes and raising profits, but many Americans, and almost all American politicians, will prefer patriotism in the wake of September 11.

The truth is that companies like Stanley Works, which will have no corporate presence in Bermuda, do very little to boost the Bermuda economy.

It is the companies with a physical presence - some three percent of the total - that contribute 70 to 80 percent of the money international companies bring to Bermuda.

Then too, as Bermuda was at pains to explain to the Organisation for Economic Cooperation and Development last year, Bermuda does not have a preferential tax system. No companies pay corporate income taxes in Bermuda.

When the OECD was tackling tax havens, the Bush Administration was reluctant to give it much support , regarding Bermuda and other reputable offshore financial centres as places that increased the efficiency of the global economy.

And companies like Stanley Works move because they are at a disadvantage with their overseas competitors. Reducing their tax rate helps them to compete in foreign markets, and that is good news for the US economy.

It is also worth noting that companies that move offshore only reduce their tax bills - they do not eliminate them.

Even companies like ACE and XL, which were founded in Bermuda and do business all over the world, pay hundreds of millions of dollars in US taxes, they have to do in order to do business there. But that does not mean they should pay taxes to the US on business they do in the UK or Germany.

That message must be made to policy makers in Washington and elsewhere. It should be recalled that one prime time TV programme effectively killed the US bases in Bermuda. It is up to Government and the leaders of international companies to ensure that one front page New York Times story does not do the same for international business.