The Economic and Social Research Institute (ESRI) has called on the Minister for Finance to avoid major tax changes in the Budget and to consider imposing a cap on the Special Savings Incentive Accounts (SSIA) scheme.
In its quarterly economic commentary, the ESRI said that, given the changed economic circumstances since the introduction of the scheme and the underestimation of its cost, reform is required.
The ESRI estimates that if all SSIA holders maximise their contributions the burden on the exchequer will reach almost €1 billion a year, double the present cost.
The ESRI described the SSIA as "a missed opportunity" as it was not linked to the wage-bargaining process. In addition, the scheme has redirected existing savings rather than encouraged a savings culture, the ESRI said.
The savings ratio stood at 12:1 per cent in 2001 and will rise to 13:4 per cent this year and 13:1 per cent in 2003.
The ESRI said this increase reflects increasing uncertainty about the economy and would have risen regardless of the SSIAs.