Bermuda and other offshore financial centres could have the threat of being shut down reduced if a blog by a former member of the House of Representatives is anything to go by.

Writing his Offshore Asset Protection blog, Robert Bauman, editor of The Sovereign Society Offshore A-Letter, said that chairman of the Senate Finance Committee, Senator Max Baucus (Democrat, Montana) had all but rejected Senator Carl Levin's radical anti-tax haven legislation.

Finance Committee staff have circulated draft legislation on behalf of Sen. Baucus that focuses on increased reporting requirements to help the US Internal Revenue Service (IRS) discover illegal tax avoidance schemes, domestic or offshore, and strengthens some IRS enforcement tools.

Earlier this month, Sen. Levin introduced a beefed-up version the Stop Tax Haven Abuse Act, a bill which he originally co-sponsored with Barack Obama last year before he became President. Bermuda was on the list of "secretive jurisdictions" targeted by the Act.

According to a statement from one of the Finance Committee aides, Mr. Bauman, who served with Sen. Baucus in the House during the 1970s, claimed that his former colleague favours a more targeted approach that would give the IRS more power to detect individual American tax cheats, rather than condemning all offshore financial centres.

"Baucus' move means he is staking out a dramatically different approach on legislation on alleged offshore tax avoidance, compared to that of Senator Levin," he said.

"And Baucus definitely has the senatorial upper hand as Finance chairman, the Committee that has jurisdiction over the Levin bill and all tax issues. Levin is not a Finance Committee member."

Mr. Bauman said Sen. Baucus's staff draft would require US banks transferring more than $10,000 to offshore accounts to report the amount and destination to the IRS and would increase penalties on certain infractions related to offshore accounts, including failure to file a return for a foreign trust and the draft would lengthen the IRS statute of limitations for certain international tax returns from three to six years.

In contrast, he said that Sen. Levin's legislation would allow the US Treasury to control, and even ban, offshore private capital flows and investments by Americans, but that it came at a time when the US government "desperately needs foreign capital and offshore investors to finance Obama's trillion-dollar deficits".

"But Sen. Levin insists he will make this bill a legislative priority this year," he said. "Among other enormities, the bill creates an unprecedented 'blacklist' of 34 offshore jurisdictions (Switzerland included) that would be presumed to be 'tax evasion' sites. This presumption is based mainly on the fact these jurisdictions have high degrees of financial secrecy guaranteed by law."

Mr. Bauman said that Sen. Baucus' approach was consistent with more reasonable past IRS practice in which individual, named taxpayers are audited or investigated and proceeded against on a case-by-case basis, but that Levin's "ham-handed bill" would condemn all users of tax havens and the havens themselves, creating a radical presumption that any American engaging in offshore financial activity is a tax cheat.

The Finance Committee plans a hearing on the Baucus draft legislation on Tuesday, March 17.