ISME has warned that any further increase in the tax burden would likely do more damage to the business sector than greater cutbacks in current expenditure.
The Irish Small and Medium Enterprises Association made the warning in its pre-Budget submission.
ISME called on the Government to implement a 75-25 ratio between expenditure cutbacks and revenue raising measures instead of the 65-35 already proposed.
''It is obvious that the process of fiscal consolidation and austerity has had a more negative impact on economic activity that it originally envisaged,'' ISME's chief executive Mark Fielding said.
In the Budget, the Government must ''introduce policies that will underpin competitiveness, support enterprise and instil confidence, both domestically and internationally, in an economy that continues to contract,'' Mr Fielding stated.
ISME also stated that the threat of increased PRSI and a mandatory sick pay scheme is adding to uncertainty and fear and must not be allowed to be introduced.
''An increase in employers' PRSI and forcing the burden of sick pay on employers would just serve to increase the cost of employment and the overall cost of doing business and should be avoided,'' the association said.
ISME said the Government should introduce measures in the Budget which would allow the self employed to avail of social welfare entitlements immediately.
It also suggested the introduction of tax incentives for home owners who use tax compliant verifiable trades people. ISME said this would tackle improvement of housing stock and the black market in one initiative.
''The association believes that it is imperative that future growth be driven by the success of our businesses, particularly SME indigenous enterprises, the backbone of the economy,'' Mark Fielding said.
''It is essential that the emphasis on austerity does not hamper the real economy and that we plan for the future by introducing pro-enterprise policies that will support businesses to grow, create and retain employment,'' he added.
