Ahead of the October 7th Budget, do you have any final recommendations you would like to suggest for inclusion?
Contributor: Angela Fleming, Partner & Head of Financial Services Tax, BDO
Ireland currently faces significant economic uncertainties. These uncertainties are greater than historical levels due to geopolitical tensions (e.g. increased geopolitical tension in the Middle East) and the imposition by the US of worldwide tariffs on goods imported to the US (discussed further by my colleague Carol Lynch). It is understood that Government are currently in the process of developing a new competitiveness plan for Ireland, which is being brought to Cabinet by Enterprise Minister, Peter Burke. Minister Burke has noted that Ireland must “pivot with purpose” in order to support the indigenous enterprise and foreign direct investment of tomorrow.
It is understood that the new competitiveness plan will look to scale-up funding for SMEs, create a new national artificial intelligence agency, and detail plans to lift the Dublin Airport passenger cap. New tax-based supports that allow SMEs to adopt innovative technologies may be looked at this year as part of the Budget, along with potential expansion of the R&D tax credit regime.
These are all welcome developments, but there are some fundamental changes that could be made to the Irish tax system that impact on Ireland’s competitiveness and significant changes in these areas would represent a step-change for Ireland. The first is the Personal Tax system. I have written before about the heavy tax burden facing individual Irish taxpayers. Marginal Income Tax rates at 52%/55% put Ireland at a significant competitive disadvantage internationally. Recent budgets have seen modest increases in rate bands and tax credits, but these have done little more than offset increases in the cost of living.
Another change that warrants serious consideration is a reduction in the rate of CGT. We pride ourselves on being competitive on tax, and we want to do more to encourage innovation and investment, yet we have a 33% rate of tax on capital gains that is uncompetitive internationally. While there are various reliefs available, as the saying goes “once you’re explaining, you’re losing” – a reduction in the headline rate is what is needed.
It’s time to stop tinkering around the edges and get serious about maintaining Ireland’s hard fought reputation as one of the best countries in the world to do business.