Former Speaker of the US House of Representatives Newt Gingrich has called for the repeal of a new law that dramatically hikes taxes on US expatriates living and working abroad. He also said American companies should join him in speaking out against the law since it diminishes competitiveness and will hurt the economy.

?There is no question when you make it more expensive for Americans to work overseas, you reduce the number of people selling American goods and services,? Mr. Gingrich said in an interview last night at the China Club in Hong Kong.

Under the new law, Americans working abroad can exclude up to $82,400 from their foreign earned income, a slight increase from $80,000 of previous years. However, the tax exclusion on foreign housing expenses will be capped at $11,536 in 2006 and the new rules will also push many Americans into higher tax brackets.

President Bush signed the election year tax legislation into law on May 17. It is retroactive to January 1, 2006 which means the 4.1 million Americans living outside the US ? including those in Bermuda ? will carry the increased tax burden when they file their 2006 returns. As a result, employees must now adjust for the fact that their employers have not withheld enough tax from their paycheques for the first five months of the year.

Americans living overseas paid almost $3.5 billion in United States income taxes in 2001 according to the most recent data from the Internal Revenue Service. While the law is expected to raise taxes on American expatriates by an estimated $2.1 billion over the next decade, it does nothing about the hundreds of thousands of Americans living overseas who have stopped filing income tax returns.

The tax bill is ?exactly wrong?, said Mr. Gingrich. ?What is important now is for everyone who is busy trying to sell American products world-wide to get the message across to the president and the Congress that they need to repeal this and make it competitive for Americans to work in the world market,? he said.

Some Americans have also expressed concern that the law will lead overseas employers to hire non-American employees.

Other countries do not tax foreign income so their citizens can afford to work for less than Americans and still have higher take-home pay.