Business group Ibec has called for a broadening of Ireland's income tax base, adding that the scraping of the USC would narrow the tax base and put more pressure on a smaller number of tax payers.
In its 'Rethinking the tax debate' report, the group said that tax on work is too high, but that many people are not paying any income tax at all.
To remedy this it suggested reducing the top marginal rate, including PRSI and Universal Social Charge, to no more than 45%. At the same time it said the point of entry into the income tax net should be lowered.
Ibec has also called for the retention of USC, and said it should be used for future pension needs in the form of a contribution to a defined contribution pension scheme for workers.
The Ibec report found that Irish income tax levels are above the European average.
It also said that while the Irish social insurance model has lower rates than others in Europe, it is more redistributive.
Income tax in Ireland - at 40% of total taxation - is the fifth highest in the EU. In its report, Ibec stated that "excessive labour tax slows economic growth as it reduces productivity and labour market incentives".
Ibec also pointed out that about 50% of Irish workers pay at the top marginal rate of income tax. It said the entry point to the top marginal rates should be linked to above the average wage - currently €35,700.
39% of workers also pay more than 50 cent from a €1 pay rise in tax and benefit withdrawals - which Ibec said is causing serious concern for employers trying to reward and incentivise their staff.
"Ireland raises more than average European countries through income tax, but our marginal rate is out of line and workers hit it too early," commented Ibec's senior economist Gerard Brady.
"Election tax promises have focused on who will get what, but we need to ensure the tax system as a whole works to support growth and job creation," he added.
