The US House of Representatives tax-writing committee has approved a measure that is a move towards treating the business income of US insurers and other financial services companies doing business abroad in the same manner as other US industries.

If enacted, the measure will allow US-based insurance companies, banks, finance companies, securities dealers and other financial services firms to defer the US tax on the earnings from their foreign subsidiaries, according to the American Insurance Association (AIA). The tax will be made when such earnings are returned to the US parent company.

In Bermuda KPMG Peat Marwick manager Patrick Hackenberg said the company was keeping an eye on the progress of the proposal. Such a measure has been in the works for two years, he said.

"The tax measure may have a positive impact on Bermuda,'' he said yesterday.

"Insurers haven't been pushing very hard for it so it must not mean that much for them.'' The AIA said the provision was similar to one enacted a year ago that was line-item vetoed by US President Bill Clinton. The provision was reinstated when the US Supreme Court struck down Mr. Clinton's authority to line-item veto.

The industry has been lobbying for such a measure as other industries currently enjoy a similar benefit. In a press release the AIA stated that the new provision, which would be effective for one year, will be a move toward a permanent extension of tax deferral to the insurance and financial sectors.

"Extending this provision promotes sound tax policy and good public policy,'' AIA assistant vice president Melissa Shelk said. "It provides equal treatment to financial services firms and benefits US-based companies who support global insurance operations.'' The AIA is a trade association representing more than 300 major insurance companies which provide all lines of property and casualty insurance.

BUSINESS BUC