Rising costs and wide-ranging issues are at the forefront of concerns for every business across Ireland in the run-up to this year’s Budget announcement.
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As we head towards Budget Day 2025, taking place on Tuesday 1 October this year, all eyes are on how it will directly impact people and businesses across the country.
Thanks to a combination of high consumer spending, low unemployment, and rising tax receipts, Tom Woods, the Head of Tax in KPMG Ireland, believes the economy is in a good state of health to address many of the challenges that the country is facing right now.
“The housing crisis, green transition, and the changing international tax and political landscape – any of these alone could be era-defining challenges for Irish society and the economy,” Tom says. “It is essential that we use the tools available to us to take these challenges head-on. For me, that is the key context of this year’s budget – can we use our present strength to deliver quality affordable housing, improve our attractiveness when competing for global business, and meet our climate commitments in a manner that is fair for individuals and businesses?”
Tom Woods – Source: KPMG
Ahead of Budget Day, KPMG has submitted a range of tax policy proposals aimed at addressing these challenges.
“Our pre-budget submission calls for the establishment of an Office for Tax Simplification to review the tax code, remove duplication, and simplify the system. I cannot recall a time when businesses have faced a more rapidly evolving business environment than at present. Within that, the present pace of change in tax is unprecedented and taxpayers need to be given time to adapt to the wall of provisions brought in over the last number of years. Many businesses are overwhelmed by these changes, finding their time increasingly drawn away from the activities that grow their businesses to focus on administration and compliance matters. Simplifying our tax code has to be a focus now. By doing so, we can drive reform of overly complex tax rules that are adding to the cost of doing business and compromising competitiveness.
“We also call for the introduction of a broad and flexible participation exemption for foreign dividends to support Ireland as an international holding company location. Ireland needs to continually improve its attractiveness for foreign investment. More generally, our personal tax regime needs to be enhanced to compare more favourably with other countries.
“Increasing challenges in the international tax landscape serve to highlight the importance of the Irish indigenous sector. One of the barriers to SMEs scaling their businesses is access to risk finance and highly skilled employees. Incentives have been introduced over the years to assist SMEs in this regard. However, there is more that can be done by enhancing the Employment Investment Incentive Scheme (EIIS) and the Key Employee Engagement Programme (KEEP).
“It is also critical to reverse the changes made to the CGT Retirement Relief in the last Finance Act. The availability of CGT retirement relief is vital to the development of multi-generational family-owned businesses and farms. Last year’s changes will operate as a barrier to the transfer of Irish businesses and farms to the next generation.”
KPMG also suggests a range of measures to help address the housing crisis that includes incentivising employers to build and provide residential accommodation for their employees with a corresponding BIK exemption for employees earning less than €50,000 and reintroducing a targeted and controlled form of Section 23 relief to encourage the conversion of properties above retail units into residential units.
On the green transition, KPMG believes that measures such as increasing the R&D credit for the development of green technologies to 50%, increasing tax-free pension lump sums where the pension has invested in approved ESG funds, and making interest on green bonds tax-free should promote greater investments in green technologies.
While much of the €1.4bn to be allocated to tax measures in Budget 2025 is expected to be on personal tax measures, Tom Woods believes that there remains room for many of the other proposals he mentions above to be introduced. Even a start on some will give important signals to people, businesses, and the markets.
“We agree that it is important to remain prudent given the uncertain geopolitical and economic outlook and the potential vulnerabilities in our Exchequer receipts, but within the confines of prudent fiscal management there remains an opportunity to introduce new measures that could have a meaningful impact on some of the challenges we face as a society and as a location for businesses.”
KPMG understands the pressures faced by businesses. If you need advice and support on any of the tax issues raised in this article, please click here for more information, they would be delighted to speak with you.
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