In reference to your firm's pre-Budget communications, what are the major opportunities for the Minister of Finance to target in Budget 2026 to boost competitiveness and drive sustainable growth?
Contributor: Michelle Adams, Senior Manager, Financial Services Tax, BDO
Budget 2026 should focus on boosting competitiveness and driving growth within Ireland. The following key opportunities should be considered by the Minister of Finance in Budget 2026.
1. For Ireland to remain competitive and attract foreign direct investment, a change to the personal tax systems needs to be a key area for change.
A change to the personal tax system should not only attract foreign direct investment into Ireland but it should also be an attractive incentive to retain highly talented people in Ireland.
The changes should include an increase to the entry point to the marginal income tax rate, cap the amount of income subject to PRSI, simplify the Key Employee Engagement Programme and the Employment Investment Incentive Scheme and changes to the Special Assignee Relief Programme to make it more competitive.
2. The participation exemption for foreign dividends was introduced in Finance Act 2024.
However, there are a number of changes that can be made to the exemption to make it more favourable and attractive.
The changes include an extension of the geographic reach of the exemption, amendments to the “relevant subsidiary” and “relevant territory” definition, expanding the scope to include Section 110 companies and application of the exemption for foreign branch income.
3. Artificial Intelligence (AI) is a fast-growing industry, and Ireland should seek to attract companies within this sector. To stay attractive, a tax credit should be introduced, or the R&D tax credit should be expanded, to include relevant expenditure incurred for the purposes of businesses involved in AI.
A 100% rate of capital allowances should also be considered for AI companies in their first year.
4. The Corporation Tax Form CT1 has significantly increased in pages over the recent years. The Minister should be considering a reduced Form CT1 in this year’s budget.
There is much more to consider as part of Budget 2026 but the above will be welcomed by stakeholders and the public of Ireland, where they are addressed.