The New York Times has joined in the attack on Bermuda's reputation with a hostile assault on yesterday's front page.

Bermuda is dubbed the "tax haven of choice" by David Cay Johnston in the article which is headlined "Tax Treaties With Small Nations Turn Into A New Shield for Profits" and is a continuation of the outrage in the so called "profits over patriotism" debate now raging in the United States.

It states: "...what once were taxable profits have been turned into virtually untaxed dollars for use anywhere in the world."

The article comes after a feeding frenzy by United States Senators against companies moving offshore to cut their tax bill. The lawmakers last week vowed to push for legislation that will halt companies reincorporating in tax friendly locations like Bermuda.

The Senate Finance Committee leaders said they would aggressively press for legislation that stops US companies from moving their headquarters overseas to cut taxes.

"Our legislation ... is designed to put the brakes on the potential rush to move US corporate headquarters to tax havens," said panel chairman Max Baucus, of Montana who along with Charles Grassey of Iowa is spearheading the campaign.

During this year tax bills have been introduced by US legislators who have introduced two bills to the House of Representatives aimed at stopping US companies from relocating offshore, particularly to Bermuda.

The bills have been proposed by Rep. Richard Neal and Rep. Scott McInnis and several American legislators have indicated they will put forward further bills, including Sen. Paul Wellstone and Sen. John Kerry.

In essence, the bills aim to levy US taxes on all income - including foreign revenues and sales - earned by corporations that re-incorporate outside of the US. The debate has largely focused on Bermuda-based companies such as Tyco, Global Crossing, Ingersoll-Rand and a company which has not yet "redomesticated", Stanley Works.

Last week Weatherford International Ltd and Leucadia National Corporation also announced plans to move to Bermuda to save taxes.

Sen. Baucus said he plans to bring the bill up for a vote soon and added he was "quite confident" the legislation can be passed into law this year to reduce occurrences of the practice.

And the New York Times article is adding fuel to this fire.

It states: "Some large companies, encouraged by top law and accounting firms, are adopting a new strategy to cut taxes legally on profits they make in this country.

The technique works this way: A company transfers profits earned in America to a paper company in another country, like Barbados or Luxembourg, that has a special kind of tax treaty with the United States.

These treaties, originally intended to serve American economic interests abroad, allow companies through accounting sleight of hand to transform taxable profits into expenses that they can deduct on their American tax return. These tax-deductible expenses include interest payments to the overseas company, royalties for use of the company's logo and fees for management advice from the overseas company.

The paper company then sends the money to the United States company's worldwide headquarters in Bermuda, which has no income tax and is the tax haven of choice for many companies."

The article said that large publicly traded companies can use this method to reduce taxes on American profits to as little as 11 percent, from an average of 21.5 percent.

And it pointed to Nabors Industries and Weatherford Industries, two oil drilling services companies in Houston, and Stanley Works, a Connecticut company as being "among the first companies preparing to use the strategy to reduce taxes paid to the American government on profits earned in the United States".

It added: "Other companies with headquarters in Bermuda, including Tyco International, Ingersoll-Rand and the consulting firm Accenture, have adopted other methods to accomplish the same goal."

The article said that the "new techniques" are being promoted by leading accounting and law firms, attributing this comment to Beth Brooke, a vice chairman of Ernst & Young, the accounting and consulting firm.

It added: "Accounting and consulting firms advising on these strategies include Arthur Andersen, Deloitte & Touche, KPMG, PricewaterhouseCoopers and Grant Thornton. The top law firms include Skadden, Arps, Slate, Meagher & Flom; Baker & McKenzie; Sutherland, Asbill & Brennan; and Arnold & Porter."

It said that several dozen companies were already using part of this technique incorporating in Bermuda while keeping their headquarters in the United States to eliminate their taxes on profits made overseas.

And it pointed to Baucus, and Grassley, but said that the new strategies go beyond the techniques addressed in the legislation. It said: "The key is to use treaties with Barbados, Luxembourg and other havens. Companies need the third country and a Bermuda headquarters because the United States does not have a tax treaty with Bermuda."

And it quotes a leading tax lawyer, David P. Hariton of Sullivan & Cromwell in New York, who said he expected the debate to shift once members of Congress and citizens understood the impact on American tax revenues.

"If the transaction serves only to eliminate the US tax on foreign-source income, there are good policy arguments for allowing it," Mr. Hariton is quoted as saying. "If, on the other hand, it serves to eliminate US tax on US income then the transaction is of greater concern."

The article adds: "By creating a tax triangle out of the United States, Bermuda and a country like Barbados or Luxembourg, and pushing every rule to the limit, companies can legally pay as little as 11 percent of their American profits in taxes to the United States, said Richard E. Andersen, a tax lawyer at Arnold & Porter in New York and author of "Income Tax Treaties of the US", a tax guide published by Warren Gorham & Lamont."

It said Congress imposes a 35 percent tax on profits of large companies, but after taking advantage of deductions and loopholes, the largest 9,669 companies paid an average of 21.5 percent of their profits in American income taxes in 1998, the latest data from the Internal Revenue Service shows. These taxes totalled $141.6 billion, or nearly 18 percent of the total income taxes paid by companies and individuals, the article added.

"Just how much companies expect to save on taxes on their United States profits is not known because the companies have not disclosed it," it said.

"One of the most common of the new tax avoidance techniques, which does not yet have a commonly used name, works this way. First, a company re-incorporates in Bermuda or a similar tax haven where there is no income tax and where all it needs is a mail drop. That allows the company to eliminate American taxes on its profits overseas.

"How much companies pay in taxes on their overseas profits depends on which countries they operate in and their tax strategies. But most of those using this arrangement have said they expect to lower worldwide income taxes from more than a third of their profits to a quarter or less."

The article continues: "The key to the new method is setting up a paper company in a third country that has a tax treaty with the United States allowing companies to move large amounts of money to an overseas parent company and to reclassify these formerly taxable profits as deductions.