A new 25% tax rate on all residential rental incomes is being proposed by the Irish Property Owners Association (IPOA) and Institute of Professional Auctioneers and Valuers (IPAV) to help stem the exit of small landlords from the market.

The organisations claim the tax lost as a result of lowering the current rate from 55% to 25% could be made up by widening the net to include investment funds and Real Estate Investment Trusts (REITs).

"It is entirely inequitable that two different investors both providing identical product and service can have such disparity in tax treatment," the two associations said in a joint statement.

"The private investor is taxed at a marginal rate of up to 55% whilst the private equity fund/REIT pays 0% tax on rental profit, once they exit the market within a defined period."

"While this practice is riddled with imparity for our members, it is the loss to the Exchequer that is astounding when one considers that some REITs continue to make rental profits totalling hundreds of millions of euro."

They estimate that were this approach taken, it would be cost neutral to the exchequer.

The two bodies will appear before the Oireachtas housing committee tomorrow to discuss the challenges facing the private rental sector.

The suggestion is contained in a submission made to the committee in advance of tomorrow's hearing.

"The private rental sector has an important role to play in the provision of homes," said Committee Cathaoirleach Deputy Steven Matthews.

"There are a number of developments in the sector that concern the Committee."

"These include increasing rents outside pressure zones, a fall in the number of properties available to rent, the number of notices to quit being issued by landlords and the growing number of landlords selling properties and exiting the sector.

Data continues to show a persistent shortage in the number of homes available to rent in the market.

This, experts say, is contributing to driving up further the cost of renting here.