Friday’s landmark announcement by the Organisation for Economic Cooperation and Development saw more than 130 countries agree to a global 15% minimum corporate tax rate and other policies to combat tax avoidance.

Negotiations that have lasted years were aided by President Biden’s support and Treasury Secretary Janet Yellen’s unprecedented costs from the COVID-19 pandemic.

Mathias Cormann (OECD secretary general) stated in a statement that “Today’s agreement would make our international tax arrangements fairer, and work better.” “We must now work quickly and diligently in order to ensure that this major reform is implemented effectively.”

This deal targets corporations that use a variety of strategies to reduce their tax liability. These include shifting profits and revenues to low-tax countries like Bermuda, Ireland, or the Cayman Islands. According to the Treasury Department, the practice of American and foreign multinationals cost the U.S. tens or billions of dollars every year.

The OECD estimates that the agreement signed by 136 countries will allow $125 billion in profits to be reallocated from 100 of the most profitable multinational corporations around the world to countries around the globe. This “ensures that these firms pay a fair amount of tax wherever they work and generate profits.”

This breakthrough came one day after Ireland, which is a beneficiary of low corporate taxes, agreed to drop opposition to the deal. Companies with an annual turnover of less than 750 million euros (or about $866 million) are also exempted from the minimum rate.

Two other European countries that are still opposed to the agreement were Estonia and Hungary. The agreement will not be activated before 2023 to allow for sufficient time for countries to amend their tax laws.

The U.S. will need to approve the tax law update by Congress. This is a difficult task that faces a long road to passage. Both the Senate and the House will have to pass legislation to increase the minimum tax on overseas profits by 15% to replace the 10.5% rate. Democrats plan to include the increase in their party-line tax- and spending bill. This bill will use reconciliation, which allows the party to bypass the 60-vote filibuster of Senate Republicans.

Biden celebrated Friday’s agreement and said that it was proof that the rest the world agrees with him that corporations can do more to help us build back better. Biden promised that his $3.5 trillion bill – which is the bulk of his economic plan to “Build Back Better”, – would be built on the OECD deal.

Biden stated in a statement that “for decades, American workers have been paying the price for a system of taxation that has rewarded multinational corporations for sending jobs and profits abroad.” This race to the bottom has not only harmed American workers but also put many of our allies in a competitive disadvantage.”