Wage developments must not damage our competitive position, the Minister for Finance has warned, just before talks on a new pay deal are due to get under way.

There are real risks to the economic outlook, he told the Institute of Taxation's annual dinner yesterday evening and this means "we must work even harder to ensure that our economy regains its competitiveness".

Talks on wage increases for the second 18 months of the Sustaining Progress national agreement are to get under way on Monday. Ahead of this, the Minister said: "It is crucial that we keep inflation low."

If wage developments do not underpin competitiveness "we will lose exports and jobs". His comments are likely to be welcomed by employers, who have sounded similar warnings in recent days.

Ireland is "in the early stages of an economic recovery", he said. But there are risks to this steady recovery scenario as the US economy may not recover as strongly as expected, while further euro strength could hit exporters.

In a wide-ranging speech, Mr McCreevy strongly defended his decentralisation policy. This was "far from being a rapidly thrown together announcement designed to overshadow other elements of the Budget", he said.

Referring to the decision by UK chancellor Mr Gordon Brown to announce a decentralisation programme in his recent budget, Mr McCreevy said: "Imagine what the politically correct chattering classes would have made if I'd done that. Oh, of course, I did!"

The Minister also said he has had concerns about the availability of meaningful data concerning the cost to the Exchequer of some schemes, particularly accelerated capital allowances, a tax relief available to business on some investments.

To remedy this, changes are being introduced to tax return forms to allow additional information to be collected by Revenue. A change will also be made to the P35 returns from 2005 to gather data on the value of employee and employer pension contributions, he said.

Institute president Ms Suzanne Kelly told the dinner that demands that tax dodgers be locked up and criticisms of the Revenue for not doing so "is an attitude that ignores both history and reality".

In the mid-1990s, the Revenue decided to go after tax evaders. "After years of indifference, it decided to get tough with tax cheats by adopting a policy of selective prosection - going after only a small number of carefully chosen cases."

Their policy of selective prosecution, in a small number of cases is efficacious, she said and in line with best international practice.

Between 1996 and 2001, the Revenue prosecuted 18 cases for serious tax evasion, equal to one prosecution per year per million of population. This corresponds with the UK experience. This means "it is obvious that only a tiny fraction of tax cheats are prosecuted".

The reason for the low rate of prosecution is that the typical profile of a tax offender is "an old infirm person" with historic arrears, more than willing to pay what they owe plus penalties.

The reality is that it makes good sense for the Revenue to go for financial settlements in the majority of cases.

Its primary objective is to collect taxes and ensure voluntary compliance.

If Revenue wanted to pursue more prosecutions, it would have to divert significant resources away from collection.

Securing a criminal conviction under our law requires a high level of proof and a lot of evidence. And even if the Revenue gets this far, a jail sentence is by no means inevitable.