The body representing Irish builders has rejected calls from the country's largest trade union for an increase in Capital Gains Tax (CGT).

The Construction Industry Federation described such a move as "the completely wrong approach to the current problems in the Irish economy".

CIF officials have instead called for a reduction in the CGT in order to stimulate increased activity in the economy.

Rejecting the SIPTU's call for an increase in CGT, Tom Parlon, CIF Director General said: "In 1998 when Capital Gains Tax was halved, business sentiment and tax receipts improved significantly. In 2002, Capital Gains Tax contributed €600 m to the exchequer. In 2007, it contributed over €3bn.

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"The downturn in the economy, however, severely impacted CGT and all other taxes in 2008 and increasing these taxes will only serve to further deflate the economy."

Mr Parlon suggested business activity in Ireland this year will come under further huge pressure because of the international financial crisis.

"Already, CGT receipts to the end of November 2008 were €1.6bn lower than the same period in 2007, showing the lack of confidence across the Irish economy," he claimed.

The CIF boss said a tax policy aimed at increasing economic activity is greatly needed.

"A policy of low Capital Gains Tax rates has a decade-long track record in encouraging business activity. This period of economic turmoil is not the time to be experimenting with a new high tax policy," he said.

Capital Gains Tax was increased in October.

Mr Parlon said a further increase three months later would damage the "already struggling exchequer position".

"Rather than experimenting with a high-tax economy, Government should be looking to protect employment and restore the economic conditions which have led to a decade of growth. Reducing CGT would help achieve this," said Mr Parlon.

(PR/JM)