In a statement released last week, IBEC said it described the measure as 'inexplicable' at the time of the Budget announcement and today, particularly in view of an inevitable decceleration of the Irish economy in the wake of the September 11 terrorist attacks, the measure is 'completely at odds with the needs of an economy undergoing a dramatic slowdown in activity.'

In its 2002 Budget Submission to the government, IBEC has stated that the budget should mark a return to the consistent approach to the taxation of employment shown by the government over a number of years. It added that the 'unexpected and uncompensated' rise in the costs relating to PRSI was a severe blow to business in all sectors, and urged the government to redress the siutation before the 'full impact is felt in the year 2002 following the 9-month tax year.'

To compensate for the removal of the ceiling in last year's budget, urged IBEC, the government should reduce the rate of employers' PRSI from 12 per cent to 9 per cent.

An organisation representing the information and communication technology industry in Ireland (ICT Ireland) which is also a part of IBEC said business would be under immense pressure on pay costs to make up for the loss of take-home pay. 'The timing of such a move could not be worse,' said ICT Ireland director Brendan Butler. 'While the medium to long-term future for the sector is bright, the short-term situation is much less certain. Ireland's attractiveness as a low-cost base is being eroded rapidly, and any further upward cost pressure will exacerbate this difficulty.'

According to Mr Butler, the removal of the employers' ceiling had cost the ICT industry over £35m. He declared: 'The situation is critical for the indigenous sector at present. Many indigenous companies are making losses and additional costs simply cannot be absorbed.'