Top finance officials representing 85 percent of global wealth have backed a plan to overhaul international taxation, including a 15 percent global minimum corporate tax to discourage big companies from resorting to low-rate tax havens.
Finance ministers from the Group of 20 countries endorsed the plan at a meeting in Venice on Saturday.
Some 132 countries have already signed up to a framework for international tax reform struck earlier this month in Paris.
But the endorsement by the 19 biggest economies plus the European Union will help make sure it becomes a reality following years of negotiations.
"We have achieved a historic agreement on a more stable and fairer international tax architecture," the ministers said in a final statement following two days of talks in Venice, hosted by G20 president Italy.
"We endorse the key components of the two pillars on the reallocation of profits of multinational enterprises and an effective global minimum tax."
French Finance Minister Bruno Le Maire said it was a once-in-a-century opportunity for a "tax revolution", adding: "There is no turning back."
"Victory!" he tweeted in reference to the plan to allow countries to tax profits generated by companies without them having a physical presence, such as through online retailing or digital advertising. France had imposed its own digital tax on US tech giants like Amazon and Google and was pushing other G20 members to follow suit.
US Treasury Secretary Janet Yellen, among those attending the grouping's first face-to-face meeting since February 2020 due to the health crisis, said the proposal would end a “self-defeating international tax competition” in which countries have for years lowered their rates to attract companies. “A race that nobody has won" she said.
Work is not done
France, the US and Germany were among several countries pushing for a higher minimum tax rate; France favoured 25 percent.
But some nations are opposed to the 15 percent minimum, notably Ireland, which lured Apple and Google to Dublin with low tax rates.
In the final statement, the G20 ministers "invite" countries to sign up.
Without the agreement of Ireland and other EU hold-outs Hungary and Estonia, the EU cannot implement the deal.
While hailing an "unprecedented agreement", EU economic affairs commissioner Paolo Gentiloni warned: "Our work is not done."
The next steps include more work on key details at the Paris-based Organization for Economic Cooperation and Development (OECD) and then a final decision at the Group of 20 meeting of presidents and prime ministers on 30-31 October in Rome, with hopes the reforms can be in place by 2023.
The minimum tax rate is expected to affect fewer than 10,000 major companies, but the OECD estimates an effective 15 percent rate would generate an extra $150 bn in revenue per year.
Non-governmental groups such as Oxfam, that analyse the tax affairs of multinationals, have criticised the reform for letting rich countries keep most of the extra tax revenue.
The G20 meeting also attracted around 1,000 protesters under the banner “We Are The Tide,” an umbrella group of environmental and social justice activists, including opponents of large cruise ships and the hordes of tourists they bring to the lagoon city of Venice.