In the United States, it's common that when companies are making expansion plans, states will compete to to be the place where these companies choose to expand. Packages can include infrastructure promises, tax rebates, and other special perks. Maybe, the most egregious example is when Amazon (AMZN  ) was looking to build out its second headquarters on the East Coast.

Of course, this same dynamic is present on an international level as countries compete among themselves to have multinational companies build facilities and headquarters thus boosting employment. One of the most common methods is by lowering corporate tax rates. Of course, this ends up being a race to the bottom and explains why many massive companies pay little in taxes.

Thus, there have been many leaders who have been working towards some sort of international tax regime that would create a minimum level of corporate tax. These efforts came closer to fruition as finance ministers from G7 nations reached an agreement on a global minimum corporate tax of 15%.

The deal is likely to increase government revenues and also puts pressure on G20 countries to follow suit. In a statement, U.S. Treasury Secretary Janet Yellen, said "the agreement on a global minimum tax would end the race to the bottom in corporate taxation and ensure fairness for the middle class and working people in the U.S. around the world."

The deal also closes the loophole, where companies can declare profits in locales with the lowest tax rates even if the bulk of the revenue originates from places with higher taxes. The deal will reduce this by forcing countries to pay more tax in countries where they sell their products and services and through a global minimum tax rate.

Although, the deal has been championed by many European countries, the coronavirus which increased urgency to grow revenues, and the Biden Administration's desire to team up on a multilateral initiative were cited as key factors.

The deal would apply to global companies with at least 10% profit margin with 20% of profits reallocated and taxed in countries of origins.

Companies like Amazon and Facebook (FB  ) are cited as companies which routinely take advantage of these laws to minimize their tax bill. According to Secretary Yellen, the new rule would certainly affect these companies. Both companies said they welcome the changes.

The deal will be discussed in more detail at July's G20 meeting between finance ministers.