European Commission warns Government is faces 'trilemma' in plans to slash tax
The European Commission has warned the Government that it faces a "trilemma" in relation to its plans to slash tax.
In its latest report, seen by the Irish Independent, the commission states that removing the Universal Social Charge (USC) "has a cost".
"The Irish government is confronted with a policy trilemma: how to continue to generate revenue and maintain progressivity without imposing very high and distortionary marginal personal income tax rates."
It adds that Ireland may not "fully comply with EU fiscal rules".
The European Commission's latest post surveillance report says that Ireland's tax base is relatively narrow but suggests the USC should be maintained.
It suggests a broadening of the tax base.
The Commission also backed plans for a rainy day fund - even though Taoiseach Leo Varadkar has said he may take a different stance.