The small and medium employers' body has called for a reduction in local authority charges and for the public service to be reduced by 7,500 employees.
In its pre-budget submission delivered to Minister for Finance Brian Cowen today, the Irish Small and Medium Business Association (Isme) described the rising cost of public sector wages as "a tightening noose around the neck of the exchequer".
It suggested that benchmarking has failed and that the public sector is in need of reform.
To counteract the impact of inflation, Isme has suggested the introduction of tax credits, along with standard rate bands and the exemption of those on the minimum wage from the tax net.
It has suggested a rebate on excise duties on companies with heavy usage of oil and oil products to compensate for recent energy price rises.
Isme also recommended tax breaks for the use and promotion of alternative energies including bio fuels and wind energy to offset the over-reliance on electricity and gas.
To ensure the timely development of infrastructure projects Isme called for capital investment of 7 per cent of GNP over the next ten years.
The timely and efficient delivery of projects through the planning process would be best delivered through a National Infrastructure Agency, it argued.