Finance ministers from wealthy G7 nations have endorsed a global minimum corporate tax of at least 15%, 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 organisations 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% 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.
Minister for Finance Paschal Donohoe also attended the discussions, in his capacity as the current president of the Eurogroup of 19 countries that use the single currency.
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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 said that the company wanted "the international tax reform process to succeed and recognise this could mean... paying more tax, and in different places".
At the @G7 in London today, Chancellor @RishiSunak and his counterparts came to a historic agreement on global tax reform that will require the largest multinational tech giants will pay their fair share of tax in the UK. pic.twitter.com/NV9D82T5bX— HM Treasury (@hmtreasury) June 5, 2021
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".
Mr 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 US President Joe 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 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".
Following the G7 announcement, Mr Donohoe said that any final deal on reforming global corporation tax rules must meet the needs of both small and large countries.
"It is in everyone's interest to achieve a sustainable, ambitious and equitable agreement on the international tax architecture," he said on Twitter.
I look forward now to engaging in the discussions at @OECD. There are 139 countries at the table, and any agreement will have to meet the needs of small and large countries, developed and developing. (2/2)— Paschal Donohoe (@Paschald) June 5, 2021
"I look forward now to engaging in the discussions at OECD. There are 139 countries at the table, and any agreement will have to meet the needs of small and large countries, developed and developing."
French Finance Minister Bruno Le Maire called it a "historic step" in the fight against fiscal evasion.
"It's a starting point and in the months ahead we will fight for this minimum tax to be the highest possible," Mr Le Maire said in a video message on Twitter.
Mr Biden had called for a unified minimum corporate tax rate of 15% in negotiations with the Organisation for Economic Co-operation and Development (OECD) and G20.
Minister says govt has been preparing budgets on basis of expected fall in revenue from CT (first drop already included in budget)— seanwhelanRTE (@seanwhelanRTE) June 5, 2021
British charity Oxfam said the agreed minimum rate was not high enough.
"It's about time that some of the world's most powerful economies force multinational corporations, including tech and pharma giants, to pay their fair share of tax," said Gabriela Bucher, executive director of Oxfam International.
"However, fixing a global minimum corporate tax rate of just 15 percent is far too low. It will do little to end the damaging race to the bottom on corporate tax and curtail the widespread use of tax havens."
Ireland, which has expressed "significant reservations" about Mr Biden's plan, has at 12.5% one of the lowest corporate tax rates in the world, prompting tech giants such as Facebook and Google to make the eurozone country their European base.
Proponents argue that a minimum tax is necessary to stem competition between countries over who can offer multinationals the lowest rate.
They say that a "race to the bottom" saps precious revenues that could go to government priorities like hospitals and schools.