The public sector pension levy is "likely" to be reduced significantly or abolished ahead of the general election, senior Government sources have told the Irish Independent.
The levy, introduced in 2009 by former Finance Minister, the late Brian Lenihan, has been targeted by public sector unions for abolition and there is a growing acceptance within Government that it will be addressed.
They have said the scrapping of the pension levy, which averages 7.5pc of salaries, would be "on the table" when detailed talks to reverse "financial emergency" pay cuts begin later this year.
Sources within both Fine Gael and Labour have said the Coalition is now considering acceding to demands to at least moderating or reducing the levy. But they have said abolishing it is also a possibility, but will depend on the extent of the continued economic recovery.
While the Government is unlikely to restore all of the cuts taken off public sector workers since the financial emergency began in 2008, tackling the public sector pay levy would be seen as a major move by the Coalition to win back the public sector vote.
"There is a recognition that reducing the levy would be likely in the context of the improving economy.
"We have to show the public something after all the sacrifices have been made," one senior Government source said.
"The numbers will determine it, but abolishing it or cutting it at the very least is certainly among considerations at the moment. Look at how the exchequer numbers shifted for the good in 2014. So, it is likely," the source said.
It is expected that negotiations will take place and be completed by September ahead of Budget day in October to allow the Government to facilitate any deal in the figures for 2016.
The country's largest public sector union, IMPACT, has warned that the entire €2.2bn worth of cuts imposed by the Haddington Road Agreement will be on the table when union leaders begin fresh negotiations with Public Expenditure Minister Brendan Howlin.
Talks between the Government and unions are scheduled to begin later this year and will be the first talks since 2008 that focus on improving terms and conditions. The pension levy, which averages about 7.5pc, was one of the first of a number of measures introduced by successive governments since 2009 to reduce the public service pay and pensions bill. It drew a furious response from public sector workers, but was welcomed by many private sector groups