Tax competitiveness refers to how a municipality's tax rates compare to neighbouring or comparable municipalities, affecting location decisions for businesses and residents. Municipalities monitor competitiveness to ensure they're not significantly out of line with comparable communities, which could discourage investment or drive residents elsewhere. However, direct tax rate comparisons can be misleading—different assessment practices, service levels, user fee policies, and community characteristics affect meaningful comparison. True competitiveness considers total cost of location including taxes, fees, service quality, and non-monetary factors. While municipalities want competitive taxes, excessive focus on tax competition can trigger 'races to the bottom' that undermine service quality and fiscal sustainability.