In addition to its ability to raise revenue and redistribute income, the taxation system can 1 be a powerful device for changing behaviour. Many existing tax systems discourage activities that are socially beneficial such as employment and investment and encourage activities that cause environmental damage including pollution and excessive resource use. There is therefore scope to restructure tax systems in revenue-neutral ways that both promote greater employment and inhibit environmental damage. This is the idea behind environmental tax reform (ETR), an idea that is being extensively discussed, analysed and implemented in Europe and elsewhere. ETR represents the policy direction of the future, for it shows a way out of the often futile debates over jobs versus the environment
