Competition policy has to be used more aggressively to help drive down inflation, the Tanaiste and Minister for Enterprise, Trade and Employment, Ms Harney, said yesterday.
She also said the level of personal taxation was still too high and that people below the minimum wage should not pay any tax.
"There are still huge areas of the economy that are not exposed to competition and I think that puts pressure on inflation," she said.
Ms Harney said that many areas, particularly utilities such as transport, had little or no competition and this needed to be addressed.
"If we use competition as our yardstick, we have a lot more to do," she said. "We've seen what's happened in the telecoms industry, for example. The introduction of competition there has substantially reduced prices and improved quality, and we have to do that in other sectors of the economy."
Fiscal measures should also be used to combat inflation, according to Ms Harney.
"Taxation of work is still too high," she said. "In an environment where we have 20 per cent on capital gains and 12.5 per cent on corporation profits, we can't have the situation where the only people that pay taxes above 40 per cent and 20 per cent are those who work. I think particularly the low to medium income earners - those that earn below the minimum wage, for example - shouldn't have to pay any tax, in my opinion."
Addressing taxation rather than nominal wage increases, which had an inflationary impact, was the way forward, said Ms Harney.
"I think what's important is take-home pay rather than nominal wage increases, and social partnership has delivered over 30 per cent real increases in take-home pay - which is much higher than America or Europe," she said.
Earlier, Ms Harney had addressed a breakfast briefing hosted by the Irish Internet Association (IIA) and A&L Goodbody Solicitors' Technology Law Group.
At the briefing, she said that VAT rates on telecoms was an issue which would have to be addressed if Ireland were to achieve its objective of becoming an e-commerce hub for Europe.
"Clearly, we are at the higher end rather than the lower end within Europe, so that's something we have to address. We've seen the incentive power of low taxation. In an e-commerce environment, we have to look at the issues that affect it - and that's one of them," Tanaiste Ms Harney said.
Ms Frances Buggy, chairwoman of the IIA, said reform of the VAT rate on telecoms would be one of the issues the IIA would be including in its pre-Budget submission to the Government. She said the IIA would also be looking for sympathetic treatment of tax on gains from employee share options.
