Thanks to technical advances in the digital economy, companies can serve markets without having to be physically present in them. At the same time, sources of income have become more mobile: There is an increasing focus on intangible assets and mobile investment income that can easily be "optimized" from a tax point of view and transferred abroad.

Tax legislation has not kept pace with these developments. Most of the tax-allocation principles that apply today date back to a time when doing business internationally primarily meant transporting goods across a border to a neighboring country. But rules that were devised for this in the 1920s and 1930s are no longer suitable for today's international integration of economic processes and corporate structures. They need to be adapted to the economic reality of digital services.

In the absence of workable rules, states are losing revenue that they urgently need in order to fulfill their responsibilities. At the same time, the issue of fair taxation is becoming more and more pressing, because the number of taxpayers who make an adequate contribution to financing public goods and services is decreasing.

The resulting tensions between national fiscal sovereignty and the borderless scope of today's business activities can be resolved only through international dialogue and uniform global standards. Within the European Union, permitting groups of states to forge ahead with joint solutions to issues that can be addressed only multilaterally has worked well in the past. If such measures prove successful, other states would follow.

This approach can also serve as a global governance model for resolving international problems. In today's world, even large states cannot establish and enforce international frameworks on their own. Groups of countries still can. This has been demonstrated in the context of financial market regulation; it is starting to become clear with regard to the regulatory framework for the digital economy, and it is now being confirmed in the area of taxation.

The Seventh Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes was held in Berlin last week, bringing together representatives from 122 countries and jurisdictions, as well as the EU. A joint agreement on the automatic exchange of information on financial accounts was signed on Oct 29.

The agreement is based on the Common Reporting Standard, which was developed by the Organization for Economic Cooperation and Development. Under the CRS, tax authorities receive information from banks and other financial service providers and automatically share it with tax authorities in other countries.

In the future, virtually all of the information connected to a bank account will be reported to the tax authorities of the account holder's country, including the account holder's name, balance, interest and dividend income, and capital gains.

Various measures are in place to ensure that banks can identify the beneficial owner and notify the relevant tax authorities accordingly. The CRS thus expands the scope of cross-border, global cooperation among national tax authorities. In this way, we can establish a regulatory framework for the age of globalization.

The automatic exchange of information is a pragmatic and effective response to the perceived lack of global governance regarding international tax issues. By making taxation fairer, governments will have a positive impact on people's acceptance of their tax regimes.

This great success in the fight against international tax evasion would have been unthinkable only a few years ago. Now it is important to continue the efforts of the OECD and the G20 in the area of corporate taxation. We need to make sure that creative tax planning in the form of profit shifting and artificial profit reduction is no longer a lucrative business model.

A "beggar-thy-neighbor" taxation policy, by which one country pursues tax policies at the expense of others, is just as dangerous as beggar-thy-neighbor monetary policies based on competitive currency devaluation. It leads to misallocations - and will ultimately reduce prosperity around the world.

That is why we need to agree on uniform international standards in order to achieve fair international tax competition. The progress achieved in Berlin on the automatic exchange of tax information shows that, by working together, we can realize this goal.

The author is Germany's Federal Minister of Finance. Project Syndicate