The IMF is urging the Government not to cut taxes in future Budgets, but to prioritise spending that will help the economy to grow, particularly on infrastructure and education.
To do this whilst avoiding overheating the economy, the IMF has urged the Government to take money out of the economy in ways that do not undermine growth, and run a tighter fiscal policy to build up buffers against the next financial downturn.
It recommends the Government use the current strong growth rates and low unemployment to repair the public finances, including through tax increases.
In an end of mission report on the annual ‘article four’ process (an annual ‘health check’ carried out on all IMF member states), the IMF team recommends running a small budget surplus in 2019, and continuing to reduce the Government's debt ratio towards 50% of GDP.
To do that it recommends broadening the tax base, notably by getting rid of VAT exemptions and special rates such as that for the hospitality and hotel sector.
It also recommends further reductions in the number and extent of tax breaks.
It says the property tax should be reformed to "gradually" increase to reflect current property values.
The IMF also says the excise gap between petrol and diesel, which sees diesel costing about 10c per litre less than petrol, should be abolished.
It adds that the Government should increase housing supply, particularly through social housing.
It argues against demand raising moves such as increasing the amount of money first-time buyers can borrow, or the use of rent caps.
The IMF team argues that in the "current constellation of issues" in the Irish housing sector, such initiatives would simply push up house prices without increasing supply of housing units.
The IMF also repeated its advice to companies to prepare for Brexit.
In particular it says "close engagement with insurance companies is needed" to ensure any changes to the regulatory landscape will not affect the risk of contract continuity after the UK leaves the EU.
Insurance firms based in the UK and Gibraltar have a large market share in general insurance in Ireland.