It is an article of faith among many tax reformers that the U.S. should shift from a worldwide tax system to a territorial regime in which U.S.-based multinational corporations pay U.S. tax only on their domestic income.  Such a step would reduce or eliminate tax on the dividends these firms receive from their foreign affiliates. But a new analysis of the territorial tax systems of four nations suggests that much of the conventional wisdom surrounding such a model falls somewhere between wishful thinking and myth. My Tax Policy Center colleague Eric Toder, Rutgers economist (and former TPCer) Rosanne Altshuler,  and Harvard tax professor Steve Shay looked  closely at the territorial systems in Germany and Australia (which have had them for many years) and the United Kingdom and Japan (which have recently adopted versions). Supporters of the idea, including House Ways & Means Committee chair Paul Ryan (R-WI) and Senate Finance panel chair Orrin Hatch (R-UT), argue that it would harmonize the U.S. corporate tax system with the rest of the developed world and vastly improve the way the levy is collected. But Eric, Steve, and Rosanne found that, in practice, the line between territorial and worldwide systems is much grayer than many believe. While most other countries—including these four-- have adopted a formal territorial system that exempts repatriated dividends, the details vary widely, and often include elements of a worldwide system. At the same time, while the U.S. is often described as taxing worldwide income, the ability of multinationals to defer tax on foreign income until they repatriate it to the U.S already makes our system more territorial than political rhetoric suggests. Not only are the lines blurred between the two systems but the authors found it difficult to identify consistent patterns even among territorial tax countries. And because economies and tax laws are so different among those four nations, and between each of them and the U.S., the authors drew few clear lessons from the experiences of those countries. For instance, they identified important differences in their foreign investment climate. Japan has been a net exporter of capital; Australia a net importer; and Germany, the U.K., and the U.S. net exporters of foreign direct investment but net importers of portfolio investment. They also found huge differences in what might be called the tax culture of each country. While some U.S.-based multinationals engage in aggressive tax planning, their Japanese counterparts do not. The U.S. has responded relatively passively when businesses reduced their tax liability by reporting profits overseas. Germany, by contrast, responds much more aggressively to erosion of its tax base. In part, this may be the result of very different political and policy environments. Japan reviews its tax laws annually. Parliamentary systems prevent the sort of long-standing divided government that has hamstrung policymaking the U.S. The authors also found big differences in the relative importance of corporate taxes. Those levies account for 20 percent of government revenues in Australia but only 5 percent in Germany where, like the U.S., many businesses owners report tax on their individual returns. The authors certainly are not suggesting the current U.S. corporate tax system is flawless. In other papers, they’ve all urged major changes. Steve favors tough rules against base erosion and would bar U.S. corporations from changing their residence to avoid tax. Rosanne would eliminate the tax on dividend repatriations but impose a minimum tax on foreign corporate earnings (with a deduction for tangible investments). Eric has argued  that the U.S. corporate tax is such a mess that it ought to be replaced by a direct tax on shareholders. But in their new paper, they warn against the temptation of taking easy lessons from the experiences of other nations. Yes, most countries have territorial systems. But those models vary widely from country to country. And the economic, policy, and political environments in which they exist are vastly different from the U.S. There are good reasons for the U.S. to consider moving towards a more territorial system. But “just because everybody else does it” is not one of them.