Business is concerned that competitiveness may be further damaged through new costs and charges associated with the Budget, according to IBEC.

Already, the imposition of PRSI on benefit-in-kind is placing a heavy additional administrative and cost burden on companies, it says, and the yield here could be significantly above the €83 million estimated in the last budget.

IBEC is concerned "that the fundamental fragility of the recovery may be underestimated", according to Mr Brian Geoghegan, its director of economic policy, who was speaking at the launch of the group's quarterly economic forecast. There was some optimism about a revival in economic growth, he said, but this could be undermined by budgetary policy, or through other additional charges on business.

Companies and their employees were already facing higher costs through the imposition of PRSI and the income tax levies on benefit-in-kind, which would come into force next January. This would have direct cost implications by pushing up employer PRSI bills, as well as possibly affecting wage costs as employees may seek compensation as their net pay falls.

There were also administrative and operational difficulties for business and they had little time to deal with them, with the Revenue Commissioners only recently publishing final guidelines on how the new rules in this area would work.

The yield from the tax may be higher than originally estimated, IBEC says, as companies examine all benefits to staff to see where tax should be paid. This may lead to extra benefit-in-kind income tax, as well as the yield from the new measures which impose 4 per cent employee PRSI - up to an income ceiling of €40,420 - and the 2 per cent health levy on a range of benefits-in-kind.

Employer PRSI at 10.75 per cent is also now chargeable in this area from next January, meaning significant extra costs for some firms.

Businesses were now concerned about further additional costs and levies imposed as part of the Budget process, or in related areas such as local authority rates and charges, which will be influenced by Budget allocations to local funding.

The first part of the Budget - the spending estimates for 2004 - will be published this Thursday and IBEC is calling for tight current spending control and a willingness to let borrowing rise a little to pay for infrastructure investment.

The business lobby group argues that it is essential to avoid indirect tax increases and keep inflation low next year, as the wage agreement for the second part of the national programme is due to be negotiated.

Looking at the general economic situation, IBEC says there are undoubted signs of an uplift, but so far it is modest, with GNP expected to grow by 2.6 per cent this year and 3.5 per cent next year. However, looking at ESRI estimates that the economy can return to annual average growth rates of over 5 per cent, IBEC says that this cannot be taken for granted.