In framing his next Budget, Minister for Finance Mr McCreevy will have to decide whether there are fiscal changes to be considered in response to the changing economic environment, specifically the significant job losses endured by the IT sector.

Much is rightly made of the importance of the taxation environment for inward investment, and successive Governments have vigorously and successfully fought off efforts to interfere with our low corporation tax regime.

Mr McCreevy has followed a tax-cutting programme in his Budgets to date. These cuts have come in personal taxation, corporation tax and capital taxation. He has rightly claimed that his pro-enterprise tax policy has supported the unprecedented economic growth of recent years, with tax revenues under all these headings rising significantly.

Until last year, the only taxes Mr McCreevy had increased were on consumables such as alcohol and cigarettes, where there is a public policy objective.

However, in last year's Budget, for the first time, the Minister effectively increased taxation on employment through the abolition of the ceiling for employer and self-employed PRSI. This was done without any substantive rationale and without any indication of Mr McCreevy's future plans for PRSI contributions.

The impact of the PRSI changes in a full tax year would be to significantly increase the costs of employing higher paid employees. In percentage terms, an employer's PRSI bill for employees earning £50,000 (€63,500) to £70,000 would rise by between 37 and 91 per cent, as the table above illustrates.

The Minister implied that there was a link between the reductions in corporation tax and the removal of the PRSI ceiling. What he failed to acknowledge was that there were many employers who were not benefiting from the reductions in corporation tax.

This additional taxation will hurt emerging high-tech and communications businesses in particular, as many are not yet in profit and are trying to survive in a particularly difficult economic climate.

It will also hurt struggling companies that are not paying corporation tax. There is also a significant "third sector" (not the public or private sectors) in the Republic, which includes charities, voluntary organisations, non-governmental organisations, trade unions and professional associations.

The recent job losses in the IT sector have prompted significant debate about our industrial policy and the types of jobs we want to attract to the Republic. There is a broad consensus that we need to move "up the value chain". The attraction of manufacturing jobs will continue to be a feature of our economic development for many years to come but IDA Ireland has clearly signalled that, over time, the investment we want to attract will need to be based more on innovation and research - from business projects that are knowledge-intensive and based on high skills and expertise.

Commentators have identified a number of medium-term measures that will be necessary to facilitate this shift in emphasis, such as developing niche areas of expertise that can become magnets for future economic growth. Also important will be the need to continue to produce relevantly qualified graduates to meet the labour needs of future industry and to improve our telecommunications infrastructure.

The abolition of the ceiling on employer PRSI in the last Budget represented a direct taxation increase for those businesses and industries with employees in the higher wage brackets. It is clear the requirement to pay high social security contributions is a disincentive for employers to take on workers and for those who might be considering the establishment here of high-value operations.

Brian Walsh is chief executive of the Institute of Chartered Accountants in Ireland.