Opposition Leader Grant Gibbons said news in recent days that US companies that move to Bermuda may be denied contracts with the proposed terrorist-fighting Homeland Security Department could spell disaster for the Island and its international business sector.

And Dr. Gibbons slammed the current Government for inaction in the face of the political diatribe against "corporate inversions" which has grown more and more heated as American politicians vie for support ahead of the November elections in the US. debate.

The latest chapter in the debate - which has been waged on Capitol Hill since early in the year and with a focus on companies that move to Bermuda - came last week when the US Senate passed a measure to deny the contracts to the so-called "corporate inversions" in a voice vote.

A similar measure had already been passed in August by the US House of Representatives.

In the latest move, politicians looking to gain constituent support in the current depressed economic climate, have renewed their offensive against companies which move offshore to slash their US tax bills while continuing to benefit from Government contracts.

These, by estimates, amount to billions of dollars in revenue.

The Associated Press reported last week that "corporate inversions" or companies that set up nominal headquarters offshore while leaving most of their operations in the US currently hold at least $2 billion in federal contracts - many of them related to one of the 22 agencies that would be merged into the proposed Homeland Security Department.

One of the most vocal advocates of legislation to crack down on companies that move offshore is Sen. Paul Wellstone, who as a chief sponsor of the tax measure has called offshore relocation "an egregious tax dodge".

Looking at the ramifications of the latest attack by US legislators, Dr. Gibbons said yesterday there could be "serious consequences going forward" for Bermuda's private sector.

Dr. Gibbons added: "It is real clear that the issue has not gone away. And it is clear that Bermuda has taken the brunt in this attack and it is an attack on our credibility as an offshore jurisdiction." Dr. Gibbons cited Bermuda as a pawn in the ongoing debate being waged on Capitol Hill adding that the Island had become a "political football".

Although Dr. Gibbons conceded it would be difficult to effectively launch a lobbying campaign now given the charged political climate, he called on Government to take measures to rebuild the Island's image both in Washington and across the country. "We have lost a lot in our standing and although there is not a lot that can be done right now, it will be important, after the November elections, to re-establish links with key people in Congress."

Dr. Gibbons continued: "We have to show what Bermuda has to offer and more importantly, what Bermuda is not."

As part of this, Dr. Gibbons said it would be important to ensure that US legislators were made aware of the Island's contributions to the American economy, including Bermuda based insurers stepping up to bat when there were shortages of insurance capacity, over the last decade. He added that Government had not, in his opinion, effectively fought to keep the Island's image as an offshore jurisdiction from being tarnished in the Capitol Hill debate. "I question whether anything at all is being done by Government," he said and added that it was regretful that "Government dropped the ball when it did not continue with the lobbying done under the former United Bermuda Party Government."

In conclusion, Dr. Gibbons warned that the latest threat of legislation against companies that move to Bermuda and other offshore jurisdictions underscored that the issue was still alive and "had not gone away".