LONDON (Reuters) - Britain’s overseas financial havens should bump up taxes to wean their economies off credit crunch hit banking, insurance and funds services, a government commissioned report said today.

Michael Foot, a former Bank of England director who helped to set up the Financial Services Authority, was asked by the British government to see how the economies of nine of the country’s overseas territories and crown dependencies can be made more sustainable and resilient to shocks like the financial crisis.

“The smallest economies are particularly exposed to the downturn, but none of the nine jurisdictions I have reviewed can afford to be complacent,” Foot said in his report.

“Some now face difficult decisions and will need to look afresh at options for controlling public expenditure and increasing revenue,” Foot said.

Deloitte, a consultancy which contributed to the report, said there was a compelling case for the jurisdictions to introduce value added tax on goods and services as part of efforts to broaden out revenue.

Some of jurisdictions reviewed, such as Bermuda, have no taxes on income, profits and capital gains, with income coming from import duties and licence fees.

The UK Government signalled its backing for the report.

“This report sends a strong signal to overseas financial centres that they must ensure that they have the correct regulation and supervision in place, while also ensuring their tax bases are more diverse and sustainable to withstand economic shocks,” Stephen Timms, a junior UK finance minister, said.

Read the full story in tomorrow’s Royal Gazette