Finance Minister Paula Cox agrees with UK Treasury investigator Michael Foot's conclusion that a more diversified tax base could help to defend Bermuda against the impact of economic shocks.

She added that Bermuda had "fared relatively well" in the review of Britain's offshore financial centres, but admitted that the Island had weaknesses in tackling financial crime.

Former Bank of England director Mr. Foot said some jurisdictions faced difficult decisions as they looked for ways of cutting expenditure and increasing revenue.

Bermuda, like several other territories reviewed, charges no income tax and does not tax corporate profits or capital gains.

"We have a diversified tax structure based on a consumption tax model but accept the point that further diversification lowers the risk of sharp revenue declines during downswings in the economic cycle," Ms Cox said in a statement yesterday.

She did not elaborate on whether Government had any plans to change tax policy.

Mr. Foot said there was room for improvement for Bermuda on fighting financial crime. Ms Cox said Government had moved to deal with that weakness.

"Bermuda has a long and successful 'know your customer' or 'KYC' regime which has served to minimise the presence of rogue companies or individuals that do not adhere to good governance or best business practices.

"On the other hand, there are areas where there is a clear need for strengthening oversight and supervisory regimes in the financial service sector, in particular, fighting financial crime in its many facets.

"These weaknesses were acknowledged during the last IMF review and are being remedied. Government has completed key legislative initiatives and implementation is well under way. A dedicated team has been established and the team is focused on ensuring that Bermuda is playing its role effectively in the fight to combat money laundering and financial crime.

"Our task now is to study the report in depth and to develop a plan and timetable for timely implementation of enhancements in those areas where they are required."

Bermuda got credit for the way it underwrote Butterfield Bank's $200 million capital raise earlier this year, a reference Ms Cox described as "gratifying".

And the Island also got high marks for tax transparency through its continuing accumulation of tax information exchange agreements, now numbering 18.

"In some ways, the Foot Report debunks some of the long-standing myths and pre-conceived notions about British offshore financial centres as tax havens," Ms Cox said.

"The report notes that while many of the nine jurisdictions covered by the review have successfully developed niche positions within the global financial services market, their importance in global terms, as measured by banking flows, is relatively modest."

She added that the appointment of Alabama's former chief insurance regulator Walter Bell to the BMA's board of directors, an an independent non-executive board member of the regulator, was "ahead of the curve".

"We welcome the report as it provides an outside assessment of where Bermuda stands with respect to many important benchmarks including managing economic risks, the role of tax in sustaining business models, delivering effective regulation, financial sector crisis management and fighting financial crime," Ms Cox said.

"On balance, our belief is that Bermuda has fared relatively well."