Tax reductions are crucial to maintain competitiveness, according to the Small Firms Association.

In its annual economic statement, the SFA is calling for a top rate of tax of 40 per cent and the rolling back of employers' PRSI increases.

According to the SFA, business confidence remains high, standards of living are close to the EU average, full employment is achievable and buoyant public finances are forecast for a number of years.

"Ireland must now direct efforts to solutions and new thinking for optimising our performance in the euro zone."

It is calling for issues such as personal taxation, housing, infrastructure, the labour market and harmonisation to be addressed.

According to SFA director Mr Pat Delaney, high taxes discourage effort and skills development and are marginalising the people with shills the economy badly needs. The SFA is calling for the top rate of tax to be reduced to 40 per cent. "Otherwise Ireland is in danger of losing highly skilled people to other economies with more benign tax regimes."

He added that the Government's decision to increase employers' PRSI contribution by 20 per cent was a tax on skills which made no economic sense.

Ireland is also close to full employment which means getting about 50,000 more people into productive employment which would be an unemployment rate of 4 per cent.

However, it is also calling for more resources to be spent on education as the targeting of training on long term unemployed is weak.

Educational investment aimed at marginalised communities and the long term unemployed must be the direction of future policy, the report states.

The organisation is calling for greater provision of childcare places, as well as increases in child benefit.

"Providing tax breaks without increasing the number of places available will simply increase the cost of childcare and further reduce the opportunity for women to return to work."