Government is set to "redefine its relationship" with companies that redomicile to the Island from the US to slash their US tax bill, Premier Ewart Brown said.

Companies including industrial giants Ingersoll-Rand and Cooper Industries have relocated their headquarters to the Island — a manoeuvre known as corporate inversion — and thereby sought to avoid paying US tax on their non-US profits. Typically, the operational headqurters remain in the US. Such cases have become a hot political issue in recent years. When Democrat John Kerry ran for president four years ago, he referred to such firms as "Benedict Arnold" companies, citing the name of an American traitor, who switched sides during the American Revolution.

"The corporate inversions are few and far between — I think there are fewer than 20 of them in Bermuda and I believe that over the next year or so we will redefine our relationship with those companies," Dr. Brown said.

He did not elaborate on what action would be taken. US Consul General Gregory Slayton said: "The Premier and I have talked about this issue and I'm sure that the Government will do the right thing, when it's the right time to act."

A report by the US Treasury last year said it had "strong evidence" that companies like Ingersoll and Cooper had shifted "substantially all their income out of the US". By diverting income from the US subsidiary to the offshore parent company — a technique known as "earnings stripping" — companies were minimising the amount of tax paid even on their US profits, the Treasury report said.

When toolmaker Connecticut-based Stanley Works said it would relocate its headquarters to Bermuda to reduce its tax bill by $30 million five years ago, it sparked an avalanche of bad publicity, which persuaded the company's shareholders to reject the move.

Corporate inversions are distinct from the vast majority of the Island's key insurance and reinsurance sector companies, which incorporated originally on the Island, rather than shifting their headquarters from the US.