All budgets are balancing acts. Crafting one requires deliberate choices about what to prioritise and what must wait. When a Government presents a budget, it is, in effect, declaring to the electorate: “We listened to you. This is our plan.”
National budgets are closely scrutinised, not only by committed tax observers like me, but also by voters and financial markets. On October 1st, both groups will be looking for answers to the same question: “What does this actually mean for us?”
With the general election on the horizon, Budget 2025 is not just a financial plan – it’s a strategic political move. This means Finance Minister Jack Chamber’s sums on provisions and tax changes are likely designed to immediately resonate with the electorate who, understandably, have concerns over the cost of living and affordable housing challenges but also signal a strategic vision for the future and the steps this Government would take in future budgets if re-elected.
There is a thriving cottage industry dedicated to predicting budget outcomes. But rather than contributing to this speculation, I’d like to focus on three areas where Deloitte believes Budget 2025 could significantly impact the country’s strategic direction, especially at such a pivotal time.
1. Balancing the financial ecosystem
Ireland faces a concentration risk in our tax base, with a disproportionate amount of tax revenue coming from a narrow segment of the economy. Currently around 80 per cent of corporate tax receipts and 30 per cent of income tax receipts are sourced from the foreign direct investment (FDI) sector. Notably, the top 10 firms contribute nearly 60 per cent of the total corporate tax revenue.
Deloitte believes that addressing this concentration risk requires a two-pronged approach. While continuing to target and attract FDI remains key, there’s a need to boost domestic direct investment (DDI). By focusing on growing businesses that are established in Ireland and that export globally, we can diversify our tax base and reduce dependency.
To support this strategy, Ireland must actively encourage and incentivise entrepreneurs and domestic businesses. Improving our entrepreneur reliefs, simplifying the angel investor reliefs and making it easier and more cost-effective to offer equity to employees are essential measures. This wouldn’t only incentivise business growth, but also strengthen our DDI sector, ultimately leading to a more resilient and varied tax base.
2. Advancing green ambitions
According to the EPA, Ireland is currently not on track to meet its 2030 emissions targets. I believe that Ireland could advance its green agenda through a series of clean and green tax reforms designed to support decarbonisation.
Firstly, a comparative review of tax measures from other countries should be conducted to identify innovative practices that could be adapted for Ireland. Reintroducing tax relief for investment in renewable energy projects is a promising step, particularly if this relief can be applied to income or gains taxed at higher rates. Additionally, we at Deloitte are advocating for the creation of a new decarbonisation tax credit. This refundable credit would be aimed at offsetting costs incurred in reducing carbon emissions, with a revised science test to qualify for the credit. Finally, extending the participation exemption to include the sale of companies involved in early-stage renewable energy projects would further incentives investment in green technologies.
3. Simplifying our tax system
Taxes are complex, and modernising the system is a logical step forward. A practical starting point for this overhaul would be to focus on business supports. Specifically, Deloitte proposes implementing a simplification test and an ease of compliance test for all new policies and enforcement initiatives. Introducing a pre-approval process for first-time applications for the R&D tax credit could not only enhance efficiency but increase accessibility.
Of course, it’s unlikely that politicians will focus on the R&D tax credit during their door-to-door canvassing. Voters will be pressing instead on the need for increased social provision, hospital beds, public transport, school places and affordable housing. However, everything is interconnected. By refining, streamlining and simplifying our tax system, we can generate the funds needed to address these critical issues while reducing bureaucratic hurdles.
As Minister Chambers takes to his feet in the Dáil on October 1st, he knows his budget must dance to more than one tune. This electorate is looking for more than just fiscal balance, it is seeking a budget that lays the groundwork for necessities; a house to call their own, the ability to keep the lights on, a system that works to improve day-to-day life.
With the global economic environment in flux, and emerging opportunities for real infrastructural change within reach, Ireland’s ability to respond effectively now hinges on informed and forward-thinking decisions.
Daryl Hanberry is head of tax and legal at Deloitte Ireland.
For further Budget 2025 insights visit Deloitte.ie/budget.