Executives at technology firms cite tax reform as a significant challenge to their global competitiveness, according to a new report. Half of chief financial officers at technology firms say the U.S. corporate tax rate of 35% is their biggest tax concern in 2016, and 26% say policy and tax changes are their biggest challenges.

These findings are from the 2016 Technology Outlook Survey conducted by BDO USA, a professional services firm that provides tax and other services to private and public companies. The firm surveyed 100 chief financial officers at U.S. technology firms for the report.

“There is a recognition that U.S. corporate tax rates are among the highest in the world,” David Yasukochi, partner and leader of the Technology & Life Sciences Practice at BDO, told ThinkAdvisor on Wednesday. Around 10 years ago, much of the industrialized world was in the “mid to high 30%” range, he noted. “Over time, all of our trading partners have gone to significantly lower rates.”

For example, Ireland, which Yasukochi noted has historically always been very low, is at 12.5%, and the U.K. is slowly reducing its corporate tax rate from 20% to 18% by 2020.

Technology firms are an attractive target for tax income because it’s easier to move their intellectual property than, say, a manufacturing firm, Yasukochi said. Firms have been able to take advantage of that, but some countries have passed tax reforms aimed directly at technology firms.

One such reform is eliminating the “double Irish” strategy, he said. Under that strategy, multinational firms could report income in a country with a lower tax rate. “It plays upon some of the peculiarities of Irish tax law, and Ireland has actually gotten a lot of pressure from other countries to do something about it. They recently changed their laws in regard to non-resident Irish companies, which is a critical part of this structure,” Yasukochi said.

Although a lot of CFOs see impediments in the tax law, Yasukochi said, only 16% said they were increasing their tax planning activities. “I think that’s because there is a level of uncertainty, with the possibility that not only the U.S., but other countries” may change their tax laws.

Additionally, the Organization for Economic Cooperation and Development has launched an initiative to reduce tax base erosion and profit shifting (BEPS) at multinational firms. Yasukochi pointed to firms like Google and Starbucks, which have suffered backlash in the U.K. for “doing a lot of business there but not paying a whole lot of taxes.”

“The OECD just came out with guidelines for taxing technology companies,” he said. “One of the reasons why they’re at the forefront of some of the more advanced tax planning [reforms] is because with technology, you can move your intellectual property from country to country relatively easily compared to moving plants and people.”

He continued, “There seems to be some dissatisfaction that traditional transfer pricing rules can adequately tax technology companies.”

The Protecting Americans from Tax Hikes Act of 2015 (PATH Act) included several provisions that impact technology companies. For example, the research and development tax credit is now permanent. Previously, it was a temporary credit, which discouraged some firms from investing significantly in research.

It also benefits smaller tech firms by allowing them to use the R&D credit to offset alternative minimum tax.

“Many businesses had complained that temporary extensions, oftentimes passed retroactively months after the R&D credit had expired, were counterproductive to the aim of encouraging research activities. The permanency comes as good news to tech companies who are, in large part, intended beneficiaries of the R&D tax credit,” according to BDO’s report.

The Internet Tax Freedom Act, which is currently waiting to be signed into law, would ban state and local taxation of Internet access.

Tech firms are also keeping an eye on how state and local governments tax cloud-based services.

“As sales tax revenue from the sale of physical goods declines, a number of states and cities are looking to recoup their losses by taxing cloud-based and streaming services,” according to the report. “However, the decision to tax the cloud and how to tax the cloud varies from state to state and city to city, resulting in an inconsistent and complex tax environment.”

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