Barbados and the United States are still renegotiating their tax treaty, which has come under fire for enabling US companies to perform "corporate inversions".

A story in the Barbados Advocate this week said that after failing to "revise" the accord last week during a high-level meeting in Washington D.C., tax treaty negotiators from both countries are to meet again next month.

"Tax treaty negotiators from Barbados and the United States met last week in Washington, DC to continue discussions to revise the current tax treaty between the two countries. The aim of these discussions is to ensure that the treaty operates in the manner intended, providing relief from double taxation for cross-border trade and investment between the two countries," the Treasury Department said.

Barbados signed its double tax treaty with the US in December 1984, and Bermuda signed a tax treaty in 1986 with the US, spurred in part by concerns that the Barbados treaty would hurt Bermuda's insurance industry.

The use of the two treaties by some US corporations has come under fire in Congress in the last two years.

Under a process known as a "corporate inversion", a US corporation forms a foreign "shell" corporation in Bermuda and then exchanges shares of the American-based corporation for shares of the Bermuda parent.

However, it was pointed out that for the inversion to occur, inverted US companies in Bermuda must use a third country to channel money to the parent company, since a comprehensive tax treaty does not exist between the US and Bermuda.

According to US Congressman Scott McInnis, due to "vague" language in the US-Barbados tax treaty, Barbados was currently "serving as a money conduit for companies who have relocated or inverted to Bermuda to escape US taxation".

Now, US officials are attempting to tighten up the Barbados treaty to put a stop to the practice, arguing that tax treaties are aimed at solely benefiting the residents of the signing countries, and a not a third party country like Bermuda.

The Advocate said while the Americans wanted sweeping changes to the treaty, Barbados was pressed out for fewer changes and was concerned that the island was being labelled a tax haven.

Bloomberg reported on Wednesday that Congress may give a $577 million tax break to overseas investors so mutual funds run by companies like Fidelity Investments and the Frank Russell Company don't move offshore to attract foreign customers.

The House Ways and Means Committee yesterday approved a measure, sought by mutual fund companies, that would end a requirement that US funds withhold up to 30 percent in taxes on distributions paid to their shareholders living outside the US.

"We have for years wanted to remove an unnecessary disadvantage" caused by the withholding requirement, said John Collins, spokesman for the Investment Company Institute, a mutual fund trade group.

The committee added the provision to a broader bill to rewrite an export tax break that the World Trade Organisation ruled must be repealed or the US will face $4 billion in trade sanctions. Inclusion of the tax break by the Republican- controlled panel breathes new life into the proposal, which was passed by Congress in 1999 and then vetoed in a larger tax-cut bill by former President Bill Clinton. The Senate hasn't acted on it this year.

Proponents say ending the withholding requirement, at a cost of $577 million over ten years, would stop companies from setting up funds that mirror US offerings in tax havens like the Cayman Islands to avoid the withholding tax. That would keep high-paying money management jobs in the US and relieve mutual fund companies of the costs and record-keeping of operating in other countries, supporters say.