A top international business executive yesterday said Bermuda had “sold its name short” in allowing US companies to set up “shell headquarters” on the Island in order to cut millions of dollars from their US tax bills.

“Having fought so hard to earn the imprimatur of ‘blue chip jurisdiction', it doesn't make sense to risk that hard-won reputation by allowing companies to invert here from the US without asking that they bring something more than the cost of incorporation to Bermuda,” ACE Ltd. chief executive officer Brian Duperreault told Hamilton Rotary yesterday.

Mr. Duperreault's comments came after a wave of high profile companies, including Ingersoll Rand, Cooper Industries and Stanley Works, announced plans to reincorporate in Bermuda while keeping their operating headquarters in the US.

The companies have said they are making the move because, unlike most other countries, the American government taxes income earned by overseas subsidiaries of US companies.

The “corporate inversions” have provoked massive controversy in the US, whose Congress is debating various new laws, including one that would force the companies to return to the US, another that would put a moratorium on the moves and a third that would bar the companies from holding contracts with the US Government.

Both the Bermuda Government and some international company executives have argued that Bermuda is being unfairly blamed for the moves which are sparked by the US tax code.

Mr. Duperreault said his speech was not intended to debate the pros and cons of US tax policy.

But he said the Island had gone down the wrong path by letting in companies who would be little more than paper citizens and without making any real contribution to the local community.

Bermuda must safeguard

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“It's the physical presence companies that really make a difference to the Bermuda economy and a contribution to the local community. But recently a number of US corporations who were headquartered in the US decided to relocate those headquarters to Bermuda in order to effect tax savings,” he said.

“In other words, they inverted their domicile of incorporation, but the majority of their actual business continued to be managed in the US. In essence, they created shell headquarters,” he said.

Mr. Duperreault continued: “I think they were wrong to do so and I believe that Bermuda lowered the bar in accepting them to our shores. In effect, Bermuda sold its name short in letting these companies relocate their headquarters without the proviso that they contribute something of substance to the local community.”

But the veteran of Bermuda's insurance sector added: “I want to make it clear that I'm not talking about organisations who incorporate subsidiaries in Bermuda to facilitate the management of their business. I'm talking specifically about companies who say they're making Bermuda their home, but in reality are staying right where they were.

“Their workforce, their offices, the real guts of their operations remain in the US. By inverting their headquarters, they are based in Bermuda in name only.”

Mr. Duperreault concluded: “This is wrong. It does Bermuda no good, and quite frankly, I don't believe it does the US any good either. And I believe that Bermuda has every right to insist that if a company is going to choose Bermuda as its home, some stipulations come with that decision.”