(Bloomberg) ? The US Senate will approve a tax holiday for overseas earnings for companies such as Hewlett- Packard Co. and Eli Lilly & Co., said Finance Committee Chairman Charles Grassley.

The provision, part of a more than $110 billion corporate tax bill being debated in the Senate this week, would reduce by 85 percent the taxes companies pay on income earned overseas. The change is an attempt to get US companies to bring home more than $400 billion in profits they have banked in countries where taxes are lower, such as Hong Kong or the Cayman Islands.

"It will make it through the Senate; I don't know about the House" of Representatives, Grassley said in an interview. "It passed back in May and I don't think anything has changed since then."

Grassley had said that an amendment to the corporate tax bill would be one of the toughest challenges the bill faces this week. The legislation would repeal a $5 billion annual export tax subsidy to companies such as Boeing Co., and replace it with a 10 percent tax cut for all US-based manufacturers.

The manufacturing tax cut, which will reduce taxes for companies such as General Electric Co. by about $50 billion over the next decade, will boost job growth in the US, he said.

Grassley blamed the slow hiring among companies since the recession ended in 2001 on a focus on efficiency at U.S. companies. Productivity gains may have peaked, he said.

"We're just about at the end, aren't we, for productivity," Grassley said.

The measure still faces hurdles. Democratic Senator Christopher Dodd of Connecticut will try to attach an amendment to the bill that would prohibit companies from hiring workers overseas to work on any US government contracts they have. Democratic Senator Tom Harkin of Iowa will offer an amendment to prohibit the Bush administration from scaling back federal overtime rules, Grassley said.