The G7, an organization of the world's seven largest advanced economies, made a historic agreement to extract more money from multinational corporations including Amazon, Google, Facebook and Apple to decrease their incentive to transfer earnings to low-tax offshore havens.

The G-7 agreement is a start toward reforming the global tax system that observers said allowed large corporations to avoid paying billions of dollars in taxes by shifting territories. It will also assist in addressing concerns that large digital businesses can earn money in many countries while just paying taxes in their home country.

The G-7 finance ministers' agreement in London meets a US demand for a minimum corporate tax rate of at least 15% on overseas revenues and paves the way for taxes on multinational corporations in jurisdictions where they generate money rather than simply where they are located. After the G7 rich economies decided to support a minimum worldwide corporation tax rate of at least 15%, hundreds of billions of dollars might pour into the treasuries of governments left cash-strapped by the COVID-19 epidemic.

Facebook said it expects to pay more tax in more countries as a consequence of the agreement, which comes after eight years of discussions that re-ignited in recent months following recommendations from U.S. President Joe Biden's new government. Facebook’s Global Affairs Vice President Nick Clegg said, “Today’s agreement is a significant first step toward certainty for businesses and strengthening public confidence in the global tax system”.

The sessions were hosted by Britain's finance minister, Rishi Sunak, who described it as a proud moment that would establish a fair playing field for businesses throughout the world.

The nonbinding agreement would cover the tax difficulties arising from globalization and the digitalization of the economy, as well as the adoption of a global minimum tax, according to the joint communiqué, signed by Canada, France, Germany, Italy, and Japan.

Following decades of unrestricted tax competition, many economists feel the agreement was historic and a significant shift. The agreement would help the state and big business realign their relationship. They hailed it as a major victory for the Biden administration but noted that smaller countries would be less likely to directly benefit from the agreement. Although tech behemoths may be the most affected, the worldwide agreement would also affect other sorts of international firms, he added.

The United States has suggested imposing a new global minimum tax on the world's top 100 most profitable corporations. Any final deal might have significant ramifications for low-tax countries and tax havens, but national governments retain the ability to establish their own local corporation tax rates. However, if businesses pay lower rates in one country, their home governments may now be able to "lift" their taxes to the minimum rate, thereby negating the benefit of transferring profits from one country to another.

The G-7 is expected to place a strong priority on global recovery from the pandemic, as well as addressing climate change. Ministers also agreed to take measures toward mandating businesses to publish their environmental impact in a more standard manner, so that investors may more readily decide whether or not to support them.