The European Union has adopted a plan for a global minimum 15% tax on big business. Leaders gave their final approvals on Thursday after months of political wrangling.
The landmark deal between nearly 140 countries aims to stop governments racing to cut taxes in a bid to attract companies.
It was praised by US Treasury Secretary Janet Yellen as “an historic agreement which helps even the playing field”.
Corporation tax is usually based on a company’s profits. But often they might be able to pay less depending on where their offices are registered or how they invest in their business.
The newly-approved plan was drawn up under with the guidance of the Organisation for Economic Cooperation and Development (OECD) and already had the backing of Washington and several major EU economies.
But the implementation of the minimum tax in the 27-nation trading bloc was delayed as member states raised objections or adopted blocking tactics.
“Today the European Union has taken a crucial step towards tax fairness and social justice,” EU economy commissioner Paolo Gentiloni said.
“Minimum taxation is key to addressing the challenges a globalised economy creates.”
Even this week, Poland blocked the formal adoption of the measure while arguing about unrelated policies, such as sanctions on Russia.
But on Thursday’s near the end of the EU’s latest summit, negotiations took place and the tax will now come into effect across Europe at the end of next year.
European leaders praised the decision, with Germany’s Chancellor Olaf Scholz describing it as a “project close to my heart”. French President Emmanuel Macron said the country had been pushing the idea for more than four years.
The US has not taken steps to adopt the rules so far, despite Ms Yellen’s championship of the plan.
The global minimum tax is only one part, known as Pillar Two, of an OECD agreement to make sure big companies pay a “fair share” of tax.
The first pillar, which focuses on the taxation of companies where they make their profits to limit tax evasion, primarily targets digital companies.