Finance ministers from the Group of Twenty (G20) have announced their support to move ahead with overhauling the global corporate tax system.
"After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture," the finance ministers said in a joint statement.
The G20 finance ministers have agreed to the Organisation for Economic Cooperation's (OECD) proposed "two-pillar approach" that aims to ensure multinationals pay their fair share of tax in the countries they operate in, which forms the foundation of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) agreement.
The two-pillar approach is one of nexus and profit allocation and another of ensuring a minimum level of taxation of at least 15%.
If enacted, the plan would potentially prevent multinationals, such as Amazon and Facebook, from shifting profits offshore to low-tax jurisdictions such as Ireland or the British Virgin Islands to avoid paying tax.
Major details of the plans are still to be finalised, however, ahead of an October deadline, which is when the next meeting about the two-pillar approach will take place.
Earlier this month, 130 countries signed the OECD/G20 Inclusive Framework on BEPS agreement to introduce a global minimum corporate tax. The OECD estimates that the proposed agreement could increase global corporate tax income revenue by between $100-$150 billion annually.
Countries that signed the agreement included China, United States, United Kingdom, Russia, Australia, Brazil, and India. Noticeably missing, however, were countries such as Ireland and Hungary, in which negotiations remain ongoing, the OECD said.
"We invite all members of the OECD/G20 Inclusive Framework on BEPS that have not yet joined the international agreement to do so," the G20 finance ministers said.
"We welcome the consultation process with developing countries on assessing progress made through their participation at the OECD/G20 Inclusive Framework on BEPS and look forward to the Organisation for Economic Co-operation and Development (OECD) report in October."
At the time, the G7 finance ministers said the tax rate would be used to target "the largest and most profitable multinational enterprises", and that they would meet the G20 finance ministers and central bank governors this month to see whether its agreement could gain broader support from other countries.
"In 2019, an independent analysis found that 91 -- let me say it again, 91 Fortune 500 companies -- the biggest companies in the world, including Amazon -- used various loopholes so they'd pay not a single solitary penny in federal income tax. I don't want to punish them, but that's just wrong. That's just wrong. A fireman and a teacher paying 22%? Amazon and 90 other major corporations are paying zero in federal taxes?" he said.
"I'm going to put an end to that."
Following the president's remarks, US Treasury Secretary Janet Yellen said the US would work with other G20 countries to set a minimum corporate tax rate.