ITV News Business and Economics Editor Joel Hills on the G7 ministers cracking down on corporation tax
Bermuda knows how to sell itself. It attracts tourists with the lure of translucent waters and it attracts global companies with a promise not to tax their profits.
Bermuda is a moneybox for multi-nationals to save tax in a way that’s perfectly legal but there’s now enormous pressure for change.
After years of disagreement on how to reform the international tax rules there’s a feeling of change in the air.
"It is increasingly clear that in a complex, global, digital economy we cannot continue to rely on a tax system that was largely designed in the 1920s," said Mr Sunak.
Multi-national businesses have subsidiaries registered all over the world. As it stands, they can legally move sales or profits between those companies to minimise their tax bills.
The UK taxes corporate profits at a headline rate of 19%. According to the Tax Justice Network, the effective Corporation Tax rates for US multinationals in Ireland (8.1%), the Netherlands (4.9%) and Luxembourg (1.8%) can be much lower.
And in places like the Cayman Islands, the British Virgin Islands and Bermuda it’s nothing at all.
The United States proposes a solution: a global minimum corporation tax rate of 15%.
The idea is that if a multinational company moves money to a tax haven and ends up paying a rate of less than 15%, then the country where its head office is located can charge the difference.
In theory, this removes any incentive for companies to shift profits around.
The problem is the tax benefit would go entirely to the country where the head office is located, which in the case of most of the world’s biggest companies is the United States.
The chancellor wants multi-national companies to pay tax where their customers are.
If you buy a Microsoft Office product in the UK the sale is currently billed in Ireland. If you buy a book on an Amazon Kindle in the UK, the sale is billed in Luxembourg.
And until very recently, if you took out a Netflix subscription in the UK the transaction was billed in the the Netherlands.
The Fair Tax Foundation estimates that the UK would be better off to the tune of £8 billion a year if the 15% minimum tax is adopted.
"The IPPR calculates [£8 billion a year] would be enough to pay for a 5% increase in the wages of everyone in the NHS, a Living Wage for everyone that works in the care sector and free care for people over 65," said Paul Monaghan, CEO of the Fair Tax Foundation.
Without tax there are no hospitals, no schools, no roads.
Ultimately, this issue is about the funding of public services.