A bill banning state contracts to be given to companies headquartered in so-called "tax havens" ? including Bermuda ? was passed on Tuesday by the Minnesota State Government Finance Committee.

And the bill could become law by the end of the year if passed by the full state legislature, according to State representative Bill Hilty, the man who proposed the new law.

Bermuda is included in the definition of a tax haven in the one page bill, along with Barbados, British Virgin Islands, Cayman Islands, Bahamas, Cyprus, Gibraltar, Isle of Man, Liechtenstein, Monaco, Seychelles, "and any other country that has no corporate income tax or has an effective tax rate of less than ten percent on income that does not arise in or is not derived from that country".

"These are people that want to belong to the country club but don't want to pay their dues," Democrat Mr. Hilty told The Royal Gazette yesterday.

Several other US States have tried over the past two years to bring in regulations that ban Government contracts from going to nations they perceive as tax havens ? but many have hit hurdles trying to get them into law.

Mr. Hilty said that the bill was not aimed at specific companies that had reincorporated or were from Bermuda, but was more a preventative measure to stop contracts going to contractors that tried to evade US taxes.

"My feeling, frankly, is that the only reason a company that does the bulk of its business in the US and incorporates elsewhere is to avoid taxes," he said. "They are the very entities that take the most advantage of the public infrastructure paid for by taxes ? the highways, the ports, the sewage and water and they have opted not to pay."

Mr. Hilty proposed the bill (HO914) on Tuesday at the Senate Government Finance Committee and it was unanimously passed. It will now have to go before one more committee stage before it is put before the whole house.

He said: "I would hope it is passed (this year). There was considerable opposition to the bill in the last session, but most of the people who voted against it last time voted for it in the committee yesterday (on Tuesday)."

The bill basically "prohibits state contracts with tax haven countries" and reads: "No agency may enter into or renew any contract with a corporation or its subsidiary or other affiliate if the corporation is incorporated in a tax haven country and the United States is the principal market for the public trading of the corporation's stock."

If passed each company submitting a bid or contract for work for the Minnesota State government will have to say that they are not part of a company that is considered to be based in a so-called "tax haven".

There is, however, a clause in the contract which allows the State to bypass the law if it is in the public interest.

The bill said that "compelling public interest" includes ensuring the provision of essential services and ensuring the public health and safety.