IBEC has warned an Oireachtas Committee against cutting the Universal Social Charge.
The chief economist of the Irish Business and Employers' Confederation, who is before the Budgetary Oversight Committee, has said reducing the USC "would not be the best use of resources" in the upcoming Budget.
Fergal O'Brien has told TDs and Senators that a USC reduction will narrow the country's tax system further.
He said businesses are reporting that people earning below €34,000 are refusing overtime in order to avoid entering a different income tax rate.
Mr O'Brien said that therefore Ireland's narrow tax rate needed to be addressed.
In his opening statement, Mr O'Brien expressed concern over "insufficient fiscal space in budget" due to the increased need in services such as housing, transport and education.
On Brexit, he said that some regions will be six times more exposed to the impact of the UK's exit from the EU than Dublin.
He said a lot of Irish companies are "overwhelmed with the challenges and uncertainties of Brexit."
Mr O’Brien was asked by Fianna Fáil's Dara Calleary about how prepared Irish businesses are for it.
He replied, "On Brexit, for a lot of businesses it has been a slow burn.
"We saw some sectors quickly diagnosing what it was going to mean for them almost immediately, starting their contingency planning, looking at their supply chain exposure, predominantly in the food industry which I think is very advanced in terms of its awareness and planning for Brexit, and also in traditional sectors.
He added: "In the SME sector there are a lot of managers overwhelmed with the uncertainty and challenges of Brexit.
"There is still a lot of companies that are either overwhelmed by the challenge of Brexit or just haven't fully thought through where the implications might be buried somewhere in their supply chain.
They might not see a direct exposure to the UK but there is lots of companies with indirect exposures that they haven't recognised yet. I think there is a lot of awareness raising to be done."