A new proposal to remove unemployed people from the Live Register calls on the Government to allow employers to claim 50 per cent of a worker's social welfare payment to subsidise salary costs for 12 months.
The Irish Taxation Institute made the proposal in its pre-budget submission, along with measures to encourage Irish pension funds to invest in indigenous corporates, and implement new tax reliefs for individuals making loan capital investments to encourage lending from the private sector to small and medium enterprises.
It said the support would apply to workers who had been on the Live Register for at least six months, and who were taking up a new full-time position.
The organisation also called for marginal tax rates to be frozen, saying it was concerned that the marginal rate of income tax had reached the "tipping point" beyond which there would be no economic benefit to Government in raising the top rates.
The institute's president Andrew Cullen said the marginal rate of income tax, including income levy introduced last year, was at 47 per cent, the eighth highest rate in the EU.
"When this is combined with PRSI and the health levy, the aggregate marginal rate rises to a potential 55 per cent," he said. "The institute believes that combined marginal tax rates cannot be raised further."
Mr Cullen said the institute supported the principle of a progressive income tax system, but warned the current situation, where almost half of earners pay no income tax, was not sustainable.
"Notwithstanding our high marginal rates, the tax yield from income tax and levies is low in Ireland when compared with most other OECD countries," he said.
"This is particularly marked at the lower end of the income scale, especially when family allowances and supplements are taken into account. Almost 50 per cent (and rising) of income earners now pay no income tax at all and only 4 per cent of earners pay over half of the income tax yield."
The introduction of a new Universal Social Contribution should not result in any further increase to the aggregate marginal rate of tax on income, he said.
Proposals have also been put forward to boost investment by Irish pension funds in indigenous businesses, which Mr Cullen said is currently at minimal levels.
"This proposal aims to increase investment levels, offering an alternative funding mechanism for Irish corporates," he said. "We are proposing that Irish pension funds would be enabled, and possibly even required, to invest a minimum of their asset allocation in established medium and large Irish corporates."
Under the scheme, the pension fund would be required to invest 5 per cent of its resources in either unquoted Irish shares or secure corporate bonds.
