Finance ministers from wealthy G7 nations on Saturday endorsed a global minimum corporate tax rate of at least 15 percent, rallying behind a US-backed plan targeting tech giants and other multinationals accused of not paying enough.
US Treasury Secretary Janet Yellen hailed the "unprecedented commitment," saying in a statement that a global minimum tax "would end the race to the bottom in corporate taxation."
Facebook even got behind the move despite the social media giant facing the prospect of having to pay more tax – while non-governmental organizations said it did not go far enough.
Following the two-day gathering in London, the G7 said in a final communique that it will "commit to a global minimum tax of at least 15 percent on a country by country basis."
The G7 – comprising Britain, Canada, France, Germany, Italy, Japan and the United States – said it hoped to reach a final tax agreement at the July gathering of the expanded G20 finance ministers group.
The G7 also committed to making companies carry out mandatory reporting regarding the climate impact of their investments.
It additionally said it will continue to support "the poorest and most vulnerable countries as they address health and economic challenges associated with COVID-19."
Regarding the commitment on taxation, Britain's Treasury noted that "the largest and most profitable multinationals will be required to pay tax in the countries where they operate – and not just where they have their headquarters."
Welcoming the move, Facebook's vice president of global affairs Nick Clegg tweeted that the company wanted "the international tax reform process to succeed and recognise this could mean… paying more tax, and in different places."
British finance minister Rishi Sunak, who chaired the talks held in person after an easing of COVID-19 restrictions, expressed delight at "a historic agreement to reform the global tax system."
Sunak said the G7 had agreed to make the system "fit for the global digital age," as he thanked his counterparts for striking "a deal of historic significance."
The landmark move comes as governments seek to repair finances battered during the pandemic by slashed tax receipts plus vast spending and borrowing.
The London gathering has also prepared the ground for a summit of G7 leaders in Cornwall, southwest England, starting Friday, and which Biden is set to attend.
Momentum has grown behind the US-led plans to limit the ability of multinationals such as tech giants to game the tax system to boost profits, especially at a time when economies around the world are reeling from the impact of the coronavirus outbreak.
German Finance Minister Olaf Scholz on Saturday said the commitment was "very good news for justice and fiscal solidarity."
"Enterprises can no longer shy away from their fiscal obligations by cunningly transferring their profits to countries with opaque tax structures," he said, calling the move "bad news for tax havens."
French Finance Minister Bruno Le Maire called it a "historic step" in the fight against fiscal evasion.