An increase in the tax-take for high-income earners is one of a number of measures outlined by the Nevin Economic Research Institute (Neri) as an alternative way of dealing with the Government deficit. The trade union-supported think tank disputes the effectiveness of fiscal austerity in dealing with the economic crisis.

“Falling GDP in the Republic of Ireland in the last two quarters of 2011, along with a cumulative decline of 26 per cent in real terms in domestic demand from the end of 2007 to the end of 2011, testifies to the failure of fiscal austerity to kick-start economic activity,” the report states. “The most recent data . . . indicates that fiscal austerity is not working.”

Noting the Government’s intention to cut a further €5.5 billion in discretionary expenditure between 2013 and 2015, the institute argues for an alternative “adjustment pathway”, which would involve retaining the overall level of spending, stretching out the adjustment period by two years and increasing revenue.

According to Neri, the proposed increase in revenue would partly derive from tax increases on high earners as well as from extra tax revenue if an investment stimulus plan was implemented.

Neri director Tom Healy said Government expenditure was “well below the EU average” as a percentage of GDP.