In April 1996 a global approach to taxation policy was launched. Prior to this the political climate had rarely been conducive to making progress on this issue. Taxation and employment 3.
Tax competition can be a means of exerting pressure on public expenditure.
However, it can also pose employment and environmental protection problems and restrict Member States' freedom to select the most appropriate tax structure for their country, in particular by widening the tax base and reducing the rates. Trends over the last fifteen years show an increasing tax burden on labour. The burden of taxation is borne more and more by the least skilled and least mobile employees. SMEs and household firms are penalised while the larger enterprises have easier access to the opportunities provided by tax competition between countries. As the most skilled and highest paid employees are the most mobile, they are the most responsive to tax differentials between countries.