The debate over controversial corporate inversions may have died down for the time being but in reality may be far from over, according to those closely monitoring the situation both locally and in Washington.

Although both the US House and Senate approved separate legislative proposals that would have banned companies from performing inverse incorporations - the process of shifting corporate headquarters offshore while continuing to operate in the US to slash taxes - a joint resolution was not reached before Congress adjourned for the mid-term elections.

The so-called corporate inversions have been the subject of heated debate amongst US legislators and in the media since early in the year when a number of high-profile companies - including Stanley Works, Cooper Industries and Ingersoll-Rand - said they would re-incorporate in Bermuda to the tune of millions in tax savings.

Intense political and media backlash saw at least one company - Stanley Works - back off its inversion plans.

The fact that Congress failed to reach resolution on anti-inversion legislation was also seen as another blow to those fighting to crack down on companies that consider the move.

Yesterday Government, the Bermuda International Business Association (BIBA) and a Washington-based opponent of legislative attempts against inversions, all said they would keep a close eye on what happened when the new Congress reconvened in the new year. Acting Finance Minister Alex Scott said yesterday: “Government will continue to monitor developments on Capitol Hill after the congressional elections in November to weigh the likelihood of further initiatives in this area.”

Although Government said it was “simply too early to make a reasonable forecast of what lies ahead”, it did say it planned to visit Washington “soon after the congressional elections for “informal talks and initial assessment” on the matter. BIBA CEO Richard Calderon said the fact that Congress had failed to get corporate inversion legislation passed into law before the election period could be a temporary respite: “Bermuda has been the beneficiary of circumstance with other broader national concerns taking precedence in the House.”

But Mr. Calderon added: “We believe that the tax and corporate inversion issues will continue to be an issue for the House to consider and while we may have been fortunate to buy some time to continue the process of educating the members of Congress on Bermuda's role in international business, we don't believe this spells the end of the debate.

“Not a whole lot more can be said except that, obviously Bermuda's reputation has been tarnished but this is also an opportunity to re-establish that reputation.”

Speaking from an American perspective, president of the Washington-based Center for Freedom and Prosperity Andrew Quinlan yesterday told The Royal Gazette that the matter was sure to reappear when the new Congress convened.

Mr. Quinlan, a free market advocate, was speaking to the newspaper from Panama City where he was briefing members of both the Government and the private sector on corporate inversions, OECD initiatives and an attempt by American officials to make Panama give the US Internal Revenue Service (IRS) greater access to Panamanian records.

Mr. Quinlan said it was unlikely corporate inversions would get much further play this year but next year would be a different matter. He explained however that there was a remote possibility the matter could come up again this year. He said that normally the House would adjourn for the election period and not resume until the first or second week in January. Even in that case, he said it would be “several months” before real business was got down to. But in this case Congress will reconvene for a “lame duck” session a week after the mid-term elections, in mid-November.

Mr. Quinlan added there is always the chance that corporate inversion legislation could come up during the “lame duck” session but it is not likely.

He said: “The sources I've talked to don't think that is going to happen. It would be extraordinary circumstances for that to happen.”

The reason for that, he said, was that the matter had really been a “political football” with legislators pushing for a vote on the matter before the election period.

A local businessman speaking to The Royal Gazette earlier this week said that whether or not the subject proved a topic of debate for the new Congress could depend on who won control of both Houses - and that if that were the Republicans, it could fade away. But Mr. Quinlan said there were already stirrings of renewed corporate inversion debate with two proponents of a crack down against companies that had, or were considering, a reverse incorporation - Senator Charles Grassley and Senate Finance Committee Chairman Max Baucus - already stating they would re-introduce legislation and push for action in the new Congress. “It is not going away,” Mr. Quinlan said, adding: “(Some) democrats have found a way, through the corporate inversion debate, to attack the Republicans. Although some Democrats are also not in favour of legislation...”

Mr. Quinlan said his organisation,which has already spent more than ten months lobbying against legislation against corporate inversions including attending more than 75 meetings, making hundreds of phone calls and sending thousands of e-mails, will continue to meet with legislators “to explain (their proposed) ‘quick fix' would hurt the US in the long run.”

The Center is in favour of broad reforms to the US tax code - a view also held by a significant number of Republicans and some Democrats - saying the present system is at fault for driving companies overseas as they seek to compete against rivals operating in a more tax-favourable environment.