A reduction in taxation of share options in all industries should be part of the anti-inflation package in the next Budget, according to the Irish Software Association (ISA).

The ISA is calling for a reduction of the tax rate to 20 per cent on gains from stock options, a move it says will make the Republic more competitive in the global labour market.

While the Republic is now the largest exporter of software in the world, the ISA says it is concerned that the software sector's competitiveness is being eroded. The experience of its members suggests that Irish-based software companies are finding it increasingly difficult to attract the best talent. As a result, many firms are starting to export jobs overseas.

"Many sectors, not just IT, are experiencing a severe skills shortage which is causing double-digit wage inflation and eroding the competitiveness and productivity of Irish industry," says ISA chairman Mr Billy Huggard. "A reduction in taxation on share options will reduce wage inflation."