It’s no secret that our corporate tax code is a mess. At 35 percent (39.1 percent when including the average rate of the states), the U.S. corporate tax rate is the highest among the world’s developed nations, well above the Organization for Economic Co-operation and Development (OECD) average of 25.3 percent. These high rates discourage investment, meaning lower wages and fewer jobs for American workers. The U.S. is also the only major developed country still clinging to a worldwide system that taxes income earned both at home and abroad. The worldwide system coupled with the high tax rate leaves U.S.-headquartered companies at a steep competitive disadvantage and creates a powerful incentive for them to re-incorporate abroad or be purchased by a foreign corporation.

Unfortunately, these problems are about to get even worse thanks to the OECD’s Base Erosion and Profit Shifting (BEPS) Project. The initiative is intended to address corporate tax avoidance. While there are a variety of tax avoidance schemes (watch this video to see how one works), the process generally involves shifting profits to foreign subsidiaries in order to exploit lower tax rates overseas. While companies have employed these strategies for years, they have come under intense scrutiny recently (with some even calling them unpatriotic) in the wake of the Great Recession, as tighter budgets and higher debt burdens have left public officials clamoring for new sources of revenue.

In response, the OECD launched the BEPS Project in early 2013. The goal is to devise a tax reform “Action Plan” with 15 concrete policies that governments can adopt to close loopholes and minimize revenue losses.

The excerpt below, taken from an initial OECD press release, outlines the project’s objectives:

National tax laws have not kept pace with the globalization of corporations and the digital economy, leaving gaps that can be exploited by multinational corporations to artificially reduce their taxes. OECD’s Action Plan on Base Erosion and Profit Shifting (BEPS) offers a global roadmap that will allow governments to collect the tax revenue they need to serve their citizens.… [T]he Action Plan identifies 15 specific actions that will give governments the domestic and international instruments to prevent corporations from paying little or no taxes.

The BEPS initiative won’t be finished until the end of this year, but some of the policies it will recommend are fairly obvious, given documents and statements already released by the OECD. One such policy involves restructuring tax rules to ensure that companies are taxed according to “where economic activities take place and value is created.” In the case of intangibles (copyrights, patents, trademarks, etc.), the value creation occurs where the intellectual property is initially developed. Under the BEPS guidelines, then, taxes on profits from intellectual property would likely be imposed wherever the skilled workers are located. Of course, disentangling which profits are attributable to intellectual property and which are attributable to other aspects of the business is virtually impossible; the proposed BEPS rules are arbitrary and will add even more complexity to an already incomprehensible tax code.

U.S. multinationals, which hire the majority of their skilled workers in the United States, would lose out under such a scenario. The competitive disadvantage under the new rule would give multinationals a strong incentive to move high-paying research and technology jobs away from the U.S. to countries with a lower tax rate. Not only could this jeopardize America’s status as a hub of innovation, but it could also lose money: as these lucrative jobs are moved overseas, so, too, are the individual income tax revenues they generate. This makes it even more surprising that the Obama administration has signed onto the BEPS plan.

The BEPS Project underscores the need for lawmakers to reform our outdated corporate tax system. As long as it remains out of sync with the rest of the world, American businesses—and American workers—will continue to lose out.