The call from the Ibec body came as Visa Europe predicted that Irish consumers are set to spend a total of €420m online in the run- up to Christmas.
Retail Ireland said that despite the huge spend, sales in Ireland have declined 30% since their peak in 2008.
As a result, up to 47,000 jobs have been lost in the sector.
Retail Ireland director Stephen Lynam called on the Government to be more creative in tackling the economic crisis.
“An increase in consumer confidence and a revival of the domestic economy is central to getting the country back on its feet.
“Not enough has been done by Government to date. New thinking and greater ambition is required,” he said.
In particular, Retail Ireland called on the Government not to increase Vat. It said the increase in last year’s Vat rate had been partially responsible for the fall in sales.
“Retailers suffered from the Vat rise in last year’s budget, which impacted upon discretionary spending, which retailers rely on. We urgently need to see Government offset last year’s Vat rise through a freeze in excise duties, action on the black market and a reduction in business costs.”
There was a glimmer of hope for retailers, with the possibility that a boost in sales this Christmas could be a sign of a small recovery.
“Sales last Christmas were better than the year before and retailers are hoping for another improvement this year. If sales are up, we may be seeing the beginnings of a recovery in the domestic sector,” said Mr Lynam.
But Irish retailers may not be the main beneficiaries of an increase in retail sales. Visa believes there will be a record number of online sales in Ireland this Christmas.
Vice-president of Visa Ireland Conor Langford said: “This Christmas we expect a new record to be set thanks to a combination of a continued rise in internet usage, an improvement in consumer sentiment and the security features associated with Visa cards.
“With Irish consumers now using a multitude of devices such as smartphones and tablets to buy from the internet, people are more comfortable than ever shopping online. In fact by 2020, we expect half of all Visa transactions to be made on a mobile device.”