A leading proponent of free market policy has slammed the tax debate in Washington as pushing “protectionist” policy.

Andrew Quinlan, president for the Washington-based Center for Freedom and Prosperity - an organisation leading the charge against protectionist taxation policy - has cited legislators as pushing for laws that will make America's “bad tax law even worse”.

Mr. Quinlan was speaking out after Senate Finance Committee leaders Max Baucus of Montana and Charles Grassley of Iowa said they would introduce draft legislation later in the month to stop US companies from moving overseas, particularly to Bermuda, to reduce their tax bills.

Sen. Grassley has said he feels confident that the legislation could be put in place by the end of the year.

The affect of the proposed legislation - with similar drafts already introduced by Rep. Richard Neal and Rep. Scott McInnis - would be to levy US taxes on all income, including foreign revenues and sales, earned by American corporations that reincorporate outside of the US.

The debate is largely centred around companies that have either stated the intention to, or have moved to Bermuda, including Tyco, Global Crossing, Ingersoll-Rand, Cooper Industries and Stanley Works.

In addition to Capital Hill's focus on Bermuda, the Island has also been in the broadcast and print media spotlight more and more. The latest media attack came this week, with a piece on the front of The New York Times from noted tax reporter David Cay Johnston.

The piece, titled “Tax Treaties With Small Nations Turn Into A New Shield For Profits,” is the latest in a string of articles this year from Mr. Johnston on companies moving to Bermuda.

But the proposed legislation came under fire from Mr. Quinlan this week: “America's worldwide system of taxing corporate income is very anti-competitive, causing many companies to give up their US charters and instead become foreign-based companies.

“This has created a debate. On one side are lawmakers who want to meet the challenge of foreign competition, preferably by junking “worldwide” taxation and instead shifting to a “territorial” system that would only tax companies on their US income. On the other side are politicians who want to preserve “worldwide” taxation and instead impose restrictions on the

ability of companies to re-charter in other jurisdictions,” he said.

Mr. Quinlan continued: “In the United States, tax rules are hugely complex and affect the ability

of U.S. companies to compete in world markets. Other defensive responses to tax competition include proposals to harmonise taxes across countries and to restrict countries from offering tax climates that are too hospitable to foreign investment inflows.”

He added: “Those defensive responses to tax competition are a dead end. They do nothing

to promote economic growth or reform inefficient tax systems. A more constructive response to tax competition would be to learn from foreign reforms and adopt pro-growth tax policies at home.

“The United States should be a leader but has fallen behind on tax reform. For example, the United States now has one of the highest corporate tax rates among major nations,” Mr. Quinlan said.

Mr. Quinlan told The Royal Gazette last month: “We are working against such legislation. It is our major issue for the year.”

To that end, Mr. Quinlan said he is actively meeting with US legislators and may be testifying before the powerful House Ways and Means Committee on the matter.

He added: “What we said in mid-March is even more true today. Fiscal protectionism is

bad tax policy, and the Center for Freedom and Prosperity will oppose and work vigorously to defeat any legislation introduced to stifle tax competition. Tax competition is a liberalising force in the world economy.

“It should be celebrated not persecuted. In fact, high-tax California should not be allowed to stop companies from moving to low-tax Nevada, and Washington politicians likewise should not be able to stop companies from escaping bad US tax law.”

Mr. Quinlan said over the next several weeks, the CFP and other free-market groups who are active in the coalition for tax competition will launch a major education campaign for lawmakers, the media and the American people.

Meanwhile, Premier Jennifer Smith was this week drawn in to the debate. Ms Smith, who is attending the annual Risk and Insurance Management Society (RIMS) conference in New Orleans, told delegates: “We don't expect other countries to tell us how we should collect our tax.”