THE potential problem for Bermuda of Americans trying to stop companies from relocating to off-shore jurisdictions - for which read Bermuda and the Cayman Islands - will not go away. Like all witch-hunts, this one is attended by its fair share of ignorance and error.

Despite the failure of the American legislature to pass laws banning such relocations, or even penalising those who choose to follow this entirely legal activity, several US lawmakers have this week co-authored a new bill that seeks to bar US corporations moving their headquarters to "off-shore tax havens".

The example being used by US Representative Richard Neal to prove his "case" is Accenture, the professional services firm founded in Bermuda, which never was a US company in the first place.

Rep. Neal has been a dedicated foe of Bermuda for four years, making several attempts to introduce legislation that would punish companies that have moved here from the US.

Rep. Neal's anti-Bermudianism is due to pressure from old-line US insurance companies in the Northeast, whose pressure on the US Congress has led to repeated efforts to stop US companies moving off-shore. Since the companies are fighting to survive their own past errors of judgment and inefficient management styles, they fear they cannot compete with the Bermuda companies.

The Americans believe that the Bermuda companies' only advantage is lower taxation, whereas the reality is that the Bermuda companies are managed more efficiently and do not face (with one or two exceptions, following their acquisition of US companies) such problems as claims from asbestosis or investment portfolios full of poorly-selected stocks.

Rep. Neal and Democratic senators Harry Reid of Nevada and Carl Levin of Michigan introduced the new proposals, known as the Corporate Patriot Enforcement Act of 2003, on Capitol Hill this week. Their effort is being supported by Democratic senators Edward Kennedy and Richard Durbin.

The proposed bill seeks to oblige all corporations that have ever moved their headquarters outside the US after September 11, 2001 to re-incorporate back into the US. Corporations that moved off-shore prior to that date would be given up to a year to re-incorporate back in the US under the proposals.

Asked what support the bill would have in Congress, Rep. Neal said he has 115 co-sponsors in the House supporting the bill, while a legislative aide to Reid said the Senators would now begin reaching out to Senate Republicans to build support for the measure in the upper chamber.

The bill is likely to face stiff lobbying opposition from the US Chamber of Commerce, which says companies that are forced to move back to the US would have to lay off workers in order to remain globally competitive.

"(Companies moving overseas) undercut US corporations that do pay their taxes. It is unfair, it is founded on a deception, and it is time for Congress to put an end to it," Sen. Levin said. "Corporate expatriation will drain four billion dollars from the US Treasury, and the people of my state should not have to make up that difference," Sen. Reid said.

Sen. Reid has frequently cited Ingersoll-Rand as an example of the "problem" of re-incorporation. The Senator criticised Ingersoll-Rand for moving to Bermuda three months after September 11, 2001 which he said has enabled it to avoid paying about $40 million a year in US taxes. The US taxes its citizens and companies on their world-wide income. Bermuda, like Britain and many other major nations, does not. The US Treasury acknowledges that the US Tax Code, not Bermuda, causes the problem.

"I used to have such a warm feeling for Ingersoll-Rand," Sen. Reid said, stressing that the company holds millions of dollars in government contracts, and that its equipment is being used to build a new congressional visitors' centre.

An Ingersoll-Rand spokesman played down Sen. Reid's criticisms and stressed that its decision to move its headquarters to Hamilton, Bermuda was fully approved by the company's shareholders just over a year ago.

"We've heard of legislation that was similar to this for a while now, but from our perspective we continue to note that this was a shareholder-approved legal transaction at the time we conducted our transaction," said Paul Dickard, a spokesman for Ingersoll-Rand.

"We feel we've been unfairly accused by certain opponents of re-incorporation and it's unfortunate that people can't be a little more discriminating in the accusations that they make," Mr. Dickard added.

Research conducted by Representative Neal's office shows that some "nine major US companies" - he named Ingersoll-Rand, Accenture, Tyco International, Foster Wheeler Corp, APW, Cooper Industries, Fruit of the Loom, Weatherford and Noble - have re-incorporated to Bermuda and the Cayman Islands since 1997.

The total value of known Federal contracts to these companies during 2001 totalled some $849 million, according to the bill's supporters research.

"We've determined that we can pass this legislation in the Senate this year," Sen. Reid said. Sen. Neal added that he believes the bill would "get more than 300 votes" in the lower chamber if the "majority in the House of Representatives allow this bill to come to the floor".

Sources close to the two Senators said they would likely seek to gain a sponsor for the bill on the Senate Finance Committee in order to move it forward, but they also pointed out that it could be attached to another bill on the floor of the Senate as an amendment.

This technique, which allows unrelated legislation to be attached to other proposals, allows laws that otherwise would not enjoy sufficient support to be attached to laws that opponents wish to see passed, and is often described as "sneak politics".