Constructing a budget is a tactical exercise in decision-making, with the discerning selection of priorities taking precedence over other areas that can be deferred. When the budget is delivered by the government, it effectively communicates its intention to taxpayers and voters alike, as though saying, “We heard your voices and here’s our plan”.
The nation’s budgets are surveyed meticulously, not solely by dedicated tax analysts such as myself, but also the electorate and financial markets. On 1st October, both factions will be seeking clarification on how this will directly impact them.
As national elections loom, Budget 2025 isn’t merely a monetary scheme – it represents a calculated political manoeuvre. It’s likely that the fiscal calculations and changes in tax devised by the Finance Minister, Jack Chambers, are aimed to immediately engage with voters. These voters are understandably worried about living costs and the issue of affordable housing, but are also looking for an indication of long-term planning and future government actions if the party is re-elected.
A flourishing niche sector is devoted to foretelling the outcomes of budgets. However, I prefer to concentrate on three aspects where Budget 2025 could have a major effect in directing Ireland’s strategy, particularly during this critical period.
1. Stabilising the financial system
There’s a risk of over-reliance on a specific sector in Ireland’s tax landscape, with an excessive portion of tax income derived from a limited segment of the economy. At present, foreign direct investment (FDI) contributes about 80 percent of corporate tax revenue and 30 percent of income tax receipts. Interestingly, the lion’s share of total corporate tax revenue, nearly 60 percent, comes from the top 10 companies.
In Deloitte’s view, the solution to this lies in a dual strategy. While continuing to secure and lure FDI is vital, there’s a pressing need to ramp up domestic direct investment (DDI). By concentrating on cultivating businesses that were born in Ireland and export worldwide, the tax burden can be shared more evenly and dependency reduced.
In order to facilitate this, Ireland needs to stoke the entrepreneurial spirit and provide support for domestic businesses. Steps towards this could be refining our concessions for entrepreneurs, simplifying relief schemes for angel investors, making it easier and more affordable to grant equity to employees. Not only would this spur business growth, it would also bolster our DDI sector, fostering a robust and multidimensional tax base.
2. Propelling eco-friendly objectives.
Per the EPA’s reporting, Ireland is off course to achieve its goal of reducing emissions by 2030. However, it is my conviction that Ireland could bolster its eco-friendly mission through a series of green-oriented tax revisions aimed at promoting decarbonisation.
Primarily, a comparative analysis of taxation strategies from other countries can serve as a method for discovering groundbreaking practices that could be modified to suit Ireland. A reimplementation of tax breaks for investments in sustainable energy projects represents a positive action, particularly if this deduction can be applied to income or gains liable for higher tax rates. We at Deloitte are also encouraging the establishment of a new tax credit system aimed at decarbonisation. The purpose of this refundable credit would be to counterbalance the expenses incurred in minimising carbon emissions, subject to a redefined scientific assessment for credit eligibility. Eventually, extending the exemption on participation for the sale of businesses engaged in the early stages of sustainable energy projects would further stimulate investment in green technology.
Revamping our taxation framework
Taxes can be overwhelming and updating the system to match modern times would be a sensible course of action. An effective point of entry for this revamp would be honing in on support for businesses. Deloitte specifically recommends the instigation of a simplification analysis and a compliance ease test for all fresh policies and regulation initiatives. Establishing a pre-approval procedure for first-time applicants for the Research and Development tax credit might increase efficiency and improve accessibility.
Naturally, it seems implausible that politicians will pay heed to the R&D tax credit during their community outreach. Citizens’ concerns will largely centre around the demand for improved social infrastructure including medical facilities, public transport, educational establishments and affordable residential options. However, these elements are not standalone issues. With improvements and simplification in tax structure, we can generate the necessary resources to tackle these significant matters, and simultaneously, lessen bureaucratic impediments.
When Minister Chambers rises to address the Dáil on the first day of October, it’s expected that his budget should satisfy multiple expectations. The voters aren’t just after fiscal equilibrium but a budget that provides for essentials; reliable housing, stable utilities, and a system that enhances daily living conditions.
In a fluctuating global economic climate, and with the potential for tangible infrastructure changes within our grasp, Ireland’s reaction capacity now relies on knowledge-based and proactive choices.
Daryl Hanberry holds the position of Head of Tax and Legal at Deloitte Ireland.
For more insights on Budget 2025, please visit Deloitte.ie/budget.