For four decades, global corporate tax rates have fallen in an international “race to the bottom”, allowing big multinationals to reduce their burden by funnelling profits through low-tax jurisdictions. This weekend’s deal between G7 finance ministers offers a game-changing opportunity to reverse that process — and ensure companies are visibly making a fair contribution to the post-pandemic recovery. For it to succeed, the world’s largest economies more broadly will need to sign up. But it is in their own interest to do so.

The accord overturns a century of tax practice, where profits are taxed only where companies have a physical presence. Instead, any countries where the world’s largest and most profitable businesses have sales would have taxing rights over “at least 20 per cent of profit exceeding a 10 per cent margin”. Finance ministers also committed to a global minimum tax of at least 15 per cent, on a country by country basis.

The agreement also represents a revival of multilateral co-operation and constructive US leadership after the Trump years — even if it suits the Biden administration’s efforts to fund its spending plans by raising its domestic corporate tax rate. US companies could otherwise have made further moves to tax havens. If implemented, the accord lifts the threat of US tariffs against European countries planning unilateral taxes on US tech giants.