Rishi Sunak has announced an “historic agreement” has been reached to reform the global tax system.
It means multi-national business giants could face a minimum corporate tax rate of 15%.
Tech companies including Amazon, Apple and Microsoft could be affected by the new rules.
The two-day meeting, which included G7 ministers from Japan, France, Canada, Germany and Italy, comes ahead of the leader’s summit being hosted in Cornwall next weekend.
Speaking after a meeting of G7 finance ministers in London, the Chancellor said: “I am delighted to announce that today after years of discussion G7 finance ministers have reached a historic agreement to reform the global tax system.
“To make it fit for the global digital age, but crucially to make sure that it is fair so that the right companies pay the right tax in the right places and that’s a huge prize for British taxpayers.”
The Chancellor defended the decision not to push for a higher global corporation tax rate at the meeting with G7 finance ministers after US President Joe Biden had initially argued it should be 21%.
Rishi Sunak told broadcasters in London: “I would say a couple of things. First of all, the agreement reached here today says at least 15% and secondly, it is worth taking a step back.
“This is something that has been talked about for almost a decade.
“And here for the first time today we actually have agreement on the tangible principles of what these reforms should look like and that is huge progress.”
Asked whether he was tying his own hands by having a minimum rate, Mr Sunak replied: “I think what the British public want to know is that the tax system is fair, they want to know that there is a level-playing field – whether people are operating in tax havens or whether large, particularly online businesses, are able to not pay tax in the right places, they want that tackled.
“And that’s what this agreement gives us the ability to do and it has been agreed among G7 colleagues and once we broaden it out and implement it globally, it is a huge prize for British taxpayers.”
Mr Sunak said: “It’s a very proud moment and I want to say thank you to my G7 colleagues for their collective leadership and for their willingness to work together to seize this moment to reach a historic agreement that finally brings our global tax system into the 21st century.”
A spokeswoman said: “Under pillar one of this historic agreement, the largest and most profitable multinationals will be required to pay tax in the countries where they operate – and not just where they have their headquarters.
The rules would apply to global firms with at least a 10% profit margin – and would see 20% of any profit above the 10% margin reallocated and then subjected to tax in the countries they operate.
The fairer system will mean the UK will raise more tax revenue from large multinationals and help pay for public services here in the UK – in the aftermath of the Covid pandemic.
Additional reporting by PA.