Finance ministers from the G20 group of the world’s largest economies are exploring a global minimum tax on corporate profits, amid growing international consensus on tackling avoidance after the pandemic. The move to set a floor on tax rates paid by corporations comes after the US made the case for an international base rate this week, in a move by the Biden administration to end US resistance to international tax reforms. According to Reuters, France and Germany have signalled support for the US approach, which could pave the way for a landmark agreement on global tax changes this summer. It would come after years of political wrangling over reforms to the global tax system to tackle the rise of profit-shifting by multinational firms and online tech giants. The German finance minister, Olaf Scholz, said: “I’m in high spirits that with this corporate taxation initiative, we’ll manage to put an end to the worldwide race to the bottom in taxation.” His French counterpart, Bruno Le Maire, who had clashed with Washington over international taxation while Donald Trump was president, said he welcomed the change in the US position. “A global agreement on international taxation is now within reach,” Le Maire said. “We must seize this historic opportunity.” The tax proposal was discussed at virtual meetings held by the group of the group of 20 major industrial nations on Wednesday, which were attended by Rishi Sunak, the UK chancellor. Countries across the world are now working towards reaching an agreement on corporate tax reform through the Organisation for Economic Co-operation and Development (OECD) in time for a July summit of G20 finance ministers. The work is based on two pillars. The first is aimed at addressing challenges posed by digitalisation and big tech firms operating across borders, and will be used to determine where taxes are paid. In an attempt to crack down on profit-shifting to low-tax jurisdictions, taxing rights could be granted to a portion of a multinational’s profits based on where its customers reside, irrespective of the company’s physical presence in that location. Frustrated by a lack of progress after years of negotiations, several countries including the UK and France have launched unilateral digital services taxes until a global agreement can be reached. The second pillar centres on creating a global minimum tax rate, an area in which progress has typically stalled because many countries – including Ireland and the Netherlands – use low tax rates to attract international investment. At a press conference on Tuesday, the Irish finance minister, Paschal Donohoe, said: “The focus on a global minimum tax rate is a prospect that I do have reservations about … on what would be the impact of that on the competitiveness for smaller- and medium-sized economies that do have lower rates of corporate taxation and use that as part of their overall competitive model.” The Republic of Ireland has a corporate tax rate of 12.5%, which is among the lowest in the world. Several UK overseas territories and crown dependencies have low or zero corporate tax rates, including the Cayman Islands and Guernsey. It is understood the UK Treasury recognises the need for international agreement on a global minimum tax rate, although ministers want to make sure any solution is balanced and appropriately targeted. A spokesperson said the Treasury supported the OECD’s work, although suggested a deal on tackling profit-shifting was most important. “Reallocating profits so large digital businesses are taxed in the countries where they make sales remains the UK’s focus,” the spokesperson said. Tax campaigners said the American push, which is being spearheaded by the US Treasury secretary, Janet Yellen, marked a significant shift for economic policy after decades of Washington promoting lower taxes and looser government intervention. Yellen’s plan envisages a 21% minimum corporate tax rate, coupled with eliminating exemptions on income from countries that do not enact a minimum tax to discourage the shifting of jobs and profits overseas. Paul Monaghan, chief executive of the campaign group Fair Tax Mark, said the US stance had opened up a once-in-a-generation opportunity. “This could pull the rug from tax havens the world over as it would make profit-shifting a waste of time,” he said. “The devil will, as ever, be in the detail, and we can expect the likes of Facebook to fight this tooth and nail.”