A report by the United States Government Accountability Office (GAO) has recommended that the Treasury Department begin reporting revenues collected from the foreign income of US companies in preparation for reform of US international tax rules.

The report commissioned by Senate Finance Committee leaders found several European countries, Canada and Australia confront similar risks and challenges to the United States with regard to their corporate international tax policies.

The study was requested by the Senate in anticipation of tax reform and in consideration of the worldwide and territorial approaches to taxation. The study showed similar compliance risks and taxpayer burdens exist under both the worldwide and territorial approaches, including transfer pricing issues, anti-avoidance rules, foreign tax credits and domestic expense deductions.

“This report makes clear there are significant inherent challenges in international tax policy reform, and the complexity of the issues requires us to move carefully and thoughtfully. Any tax reform must be focused on a healthy economy, job growth and increased US competitiveness worldwide,” said Finance Committee chairman Max Baucus.

“We are committed to ensuring American competitiveness abroad and job-creation here at home while promoting fairness, efficiency and simplicity in tax reform. I urge Treasury to address the recommendation in this report right away, to help us better understand the implications of international tax policies on domestic companies with international operations and on the US tax base. This information could play an important role as Congress looks toward overall tax reform,” he noted.

Ranking Republican Chuck Grassley added: “This report sheds light on the territorial, or exemption, system of corporate international taxation. That’s very different from the current US system of deferral. This report underscores that US international taxation is complex. It shouldn’t be changed without thorough review and consideration by the Finance Committee, and shouldn’t be done through the use of simplistic, rigid, and inaccurate ‘black lists’ of disfavored countries. When the Finance Committee does take up corporate international tax reform, any changes should maximize US economic well-being. Transactions shouldn’t be based on tax avoidance. Changing the game on multinational corporations doesn’t make sense if it means companies will ship more jobs overseas to avoid what they see as unfair or anti-competitive US tax rules.”