Leaders from the 20 largest economies agreed to strengthen the international tax system at the G-20 summit in Osaka.

In a joint declaration at the close of the summit, the leaders welcomed recent progress by the Organisation for Economic Co-operation and Development on addressing tax challenges arising from the digitalisation of the economy.

The OECD is driving a reform of the international corporate tax system to tackle the problem that digital companies, in particular, may have significant market share but no physical presence in certain countries. Under current rules they would escape taxation in these jurisdictions.

In June, the OECD/G-20 Inclusive Framework on Base Erosion and Profit Shifting, a body of 129 member countries, agreed a document that proposes several broad solutions, as well as a timeline to reach a new global agreement for taxing multinational enterprises by the end of 2020.

The proposed solutions could cause a major change to taxing rights by allocating some of a company’s profits to jurisdictions where its consumers or users are based.

Another proposal aims to establish a minimum effective corporate tax rate for multinationals globally.

G-20 leaders said they “endorse the ambitious work program” around this two-pillar approach and that they would redouble their efforts for a consensus-based solution by 2020.

“We will continue our cooperation for a globally fair, sustainable, and modern international tax system, and welcome international cooperation to advance pro-growth tax policies,” the summit communiqué said.

G-20 leaders reaffirmed the importance of the G-20/OECD Base Erosion and Profit Shifting initiative and enhanced tax certainty.

They also hailed recent achievements on tax transparency such as the progress on the automatic exchange of tax information. The G-20 calls on all jurisdictions to ratify the multilateral Convention on Mutual Administrative Assistance in Tax Matters, which governs automatic exchange.

At the same time, G-20 leaders threatened countries that have not implemented “the internationally agreed tax transparency standards” with defensive measures.