FIANNA Fail is proposing a new small business rate of corporation tax of 27 per cent for small and medium sized companies with taxable profits under £100,000.

Party leader Mr Bertie Ahern, in a speech delivered in Cobh, Co Cork in which he outlined the taxation policies which would be part of the Fianna Fail election manifesto, said he saw small businesses as having major potential in employment creation.

Mr Ahern said the party would continue the special low rate of 10 per cent corporation tax which applies to most multinationals and manufacturing companies, and would seek an extension of the rate to selected service industries.

The party would reduce the employee PRSI rate and simplify the system, Mr Ahern said.

"Our plan is to merge the health and training levies (2.25 per cent) with PRSI (5.5 per cent). We then plan to reduce this new merged rate of 7.75 per cent in stages to 6.25 per cent, and eventually to 5 per cent.

"This reform would result in a major simplification of the PRSI system, significantly reducing the number of classes," he said.

The party will also increase the threshold for the reduced employer PRSI contribution of 9 per cent, from £231 a week to £250 a week.

"This will mean that employees will have to be on more than £13,000 a year before an employer will have to pay PRSI at the higher rate."

The party will also cut the 12.2 per cent employer PRSI rate, to 9 per cent, in stages over a series of budgets.

Mr Ahern's priorities are to take more of the lower paid out of the tax net altogether and reduce the threshold at which they start to pay tax; get rid of the anomaly whereby low to middle income earners pay 56 per cent on marginal income (top rate of tax plus full PRSI); raise substantially the threshold at which the top rate of tax is payable and gradually reduce that rate; replace property tax, and "see where capital taxation is damaging the interests of the economy."