Comments made by leading Democrat presidential hopeful, Howard Dean, show he may not be a political ally of the Island if elected in next year?s race for the Oval Office.

Mr. Dean cited Bermuda as a tax haven, and competitor for captive insurance company business in a recent news report in the Boston Globe.

That report also raised the issue, once again, of clamping down on corporate inversions and showed that Mr. Dean had it out for the Island, as a captive domicile.

The Boston Globe said Mr. Dean had often complained about Bermuda?s tax haven status, and taking a swipe at current president George W. Bush, he reportedly said the country needed a president ?who doesn?t think that big corporations who get tax cuts ought to be able to move their headquarters to Bermuda?.

That comment follows the high-profile corporate inversion debate being waged for over a year now, sparked by such large US corporations as Ingersoll-Rand and Nabors reincorporating to the Island to trim their US tax bills on globally-generated income. The controversy culminated in numerous pieces of draft legislation being brought before the US Congress, although none were passed into law.

Mr. Dean?s views on Bermuda as a captive magnet, seem to stem from his time as governor of Vermont ? the leading US captive domicile ? for 11 years. At that time, Mr. Dean was said to be vocal, on Bermuda as a rival captive domicile, including the view that Vermont could eventually beat out the Island for the top captive domicile spot.

Mr. Dean, according to The Boston Globe, succeeded in turning Vermont into the American kingdom of captives. Vermont was said to have more of these companies than all other US states combined. As part of the enticement, Dean led efforts to cut state taxes of such companies, and he helped defeat a Clinton administration effort that would have eliminated $100 million worth of federal tax deductions given to the industry.

But while nearly 500 captive insurance companies have been a windfall for Vermont providing two percent of the state?s general funds from tax on the $7 billion worth of premiums that go through Vermont annually the industry also carries some controversy.

Some analysts believe that while Vermont profits, other states lose corporate tax revenues because of the way a company?s taxable income may be reduced if it uses captives.

?Dean apparently has no problems with tax havens as long as they are in the state of Vermont,? said University of Connecticut Law School professor Richard Pomp, author of the textbook ?State and Local Taxation.?

?He can?t have it both ways, because Vermont is acting like a little Bermuda.?

As governor, Mr. Dean reportedly saw his competitor for this business as Bermuda, which is home to nearly three times as many captives as Vermont. ?We consider our competition to be Bermuda or the Cayman Islands,? Mr. Dean said in a 2001 article published by the AM Best Co.

?We feel pretty good about what we are doing, but it is competitive. Our goal is to overtake Bermuda as the world?s largest captive domicile.?

Bermuda is the leading captive domicile, with more of this kind of insurance company than any other jurisdiction. Captives are set up to insure the risks of one or more parent companies.

But Mr. Dean?s support of Vermont as a captive home may not have won him points in other states which may have lost out on tax revenue when companies moved their insurance business there.

The Globe reported that companies use captives instead of traditional insurance because of the tax advantages, an inability to get insurance from traditional insurers, and a reluctance to share the higher premiums that might be set due to a riskier pool of client.

?If set up properly, they get deductions on the premium, they pay a low rate on the premium in Vermont, and then they take their premiums and they invest them and there is no further tax on them in Vermont or any other state, so it is a triple whammy,? said Mr. Pomp.

Leonard Crouse, Vermont?s deputy commissioner of captive insurance, agreed there may be cases in which the parent company pays less taxes in its home state because the captive operation in Vermont reduces taxable income.

?That is true,? Mr. Crouse said. ?They pay less taxes, I?m sure, in those states . . . Periodically you hear different states bringing that up.?

But he said the tax situation was only one of many reasons that companies choose to set up captive operations in Vermont, noting the state?s friendly regulatory climate and its staff of 20 employees devoted to serving the business.