This publication examines the effects of taxation on employment, highlights the resulting
policy challenges, and discusses the ways governments endeavour to address these challenges.
Chapter 1 provides a broad overview of the effects of taxation on employment, examining
how taxes on labour income can affect both the size of the labour force and the level
of unemployment, and highlighting key areas of concern for tax policy makers. This
analysis is then augmented in chapters 2-4 by the more detailed analysis of the effects
of taxation on the employment of three groups where empirical research suggests that
responses of labour supply to taxation may be relatively large: low-income workers,
mobile highly-skilled workers, and older workers. As well as highlighting key areas
of concern for tax policy makers, the report places a particular focus on the different
measures that have been adopted by countries to attempt to overcome these problems,
discussing, where possible, the main design features, and the advantages and disadvantages
of the different approaches that have been adopted.