Finance Minister Paschal Donohoe is being urged this morning to introduce sweeping business tax reforms in his next budget to boost the economy.

A pre-budget submission from business lobby group Isme today argues that measures including permanently cutting the higher VAT rate from 23pc to 21pc should be considered. The rate was temporarily reduced to 21pc during the pandemic but reverted to 23pc in March.

Isme represents small and medium-sized businesses, many of whom will today open their doors for the first time in months as Covid restrictions are eased on non-essential retailers.

“Tax reform is never an easy option, but it has never been more essential,” said Isme chairman Ross McCarthy.

“We face huge challenges on the fiscal and climate fronts which can no longer be ignored. Business rarely wants more tax, but the situation Ireland finds itself in now requires all PAYE workers earning over €100,000 to bear the same tax burden as the self-employed,” said Mr McCarthy, who is also the managing director of Keystone Procurement.

Isme has told Mr Donohoe in today’s submission ahead of the 2022 Budget that a 3pc USC surcharge should be imposed on all PAYE workers earning more than €100,000 a year.

The lobby group said that for high-earning self-employed people, a 3pc USC surcharge remains in place.

“It is now apparent that this discriminatory levy will not be ended,” it said in its submission. “We therefore consider that a USC surcharge of 3pc should be introduced for all PAYE workers earning over €100,000 per annum, or a third PAYE rate of 43pc should be introduced for the same cohort.”

Isme said Revenue Commissioner estimates suggest that the move would yield more than €300m a year for the Exchequer.

The lobby group has also told Mr Donohoe that a reform of property taxes is “long overdue”.

“Commercial rates and local property taxes are technically linked, in that they are both based on what are effectively ‘retail’ valuations for property,” Isme notes. “The legislative basis for our rates system dates from 1898 and is unfit for purpose.

“Our members are willing to consider updated rates calculations systems. The current rates system requires substantial overhaul before it threatens business viability. It discriminates against town centre operators, and encourages urban sprawl and donut development, contrary to ­Project Ireland 2040.”

“We must reform our property taxes, move to site value taxation, and charge a premium for development with road frontage,” said Mr McCarthy. Isme has also told Mr Donohoe that “now is the time to spend” on key infrastructure projects to benefit the country.

“While normally a fiscally conservative organisation, Isme recognises the need for the State to act counter-cyclically as we manage our way out of the Covid-19 pandemic,” it notes.

“As we stated in last year’s pre-budget submission, now is the time to spend, particularly on long-term capital-intensive projects, as value for money will not be there when asset prices start to rise again.”