Leveraging tax policies for sustainable business growth

Five recommendations for Budget 2025

With a significant surplus expected, Budget 2025 represents a critical opportunity for the Irish Government to support businesses and individuals in the face of global uncertainty and the pursuit of opportunities.

As an election budget, Budget 2025 is an opportunity for the Government to show where current and future priorities lie. We recommend that the Government focus on five key areas to secure and embed the remarkable economic growth achieved over recent years for the benefit of future generations.

1. Seriously tackle Ireland’s housing crisis 

PwC’s 2025 Pre-Budget Submission states that Ireland’s acute housing shortage is the most imminent issue facing both businesses and employees. It is the single largest impediment to attracting and retaining talent and if left unchecked it will impact workplace productivity. The Submission calls for Budget 2025 to address this reality with appropriate measures benefitting the scale and severity of this crisis. Measures for consideration include: extension of the ‘help to buy’ scheme; policies to encourage modern methods of construction; a temporary reduction in the VAT rate for construction materials, amongst others.

2. Simplifying the tax code

PwC’s Submission stresses the urgent need for tax simplification. Ireland has an opportunity to be a first-mover in the global “decluttering” of tax rules movement which would make us more competitive and facilitate the ease of doing business. The Submission notes that it is beyond time for the main direct tax legislation (Taxes Consolidation Act 1997) to be reviewed. Within the legislation, there are a number of areas where simplification is urgently needed including our interest deductibility rules, taxing income under different schedules with multiple tax rates and simplifying reliefs such as the R&D tax credit and Employment Investment Incentive Scheme (EIIS) to make them more accessible to SMEs. Additionally, the expansion of real-time reporting to bring non-taxable benefits and expenses into scope (Enhanced Reporting Requirements) has created a significant compliance burden on employers, and one that is completely disproportionate to the value of the related benefits. An annual reporting regime for such benefits (without further expansions on the scope) would be a much better approach. 

3. More pro-growth measures and support for private business 

More measures are needed to stimulate growth and incentivise investment into private businesses. PwC’s recent EMEA Private Business Attractiveness Index ranked Ireland in 9th position out of 33 major EMEA countries.  PwC’s 2025 Pre-Budget Submission highlights the importance of the domestic private business sector and the need to support employers with the cost of employment at a time when cost increases threaten job creation. PwC’s Submission  calls for tax incentives to help private businesses incentivise, retain and attract key talent, such as further share scheme mechanisms and simplifying the KEEP scheme. The Submission calls for tax measures to assist private businesses in securing investment and raising funds, such as allowing interest earned on loans by angel investors to be taxed at 12.5% (instead of 25%). It also proposes increasing the lifetime limit for the Revised Entrepreneur Relief to €5m (from €1m) and removing cash as a non-qualifying asset for Capital Acquisitions Tax Business Relief purposes.  

4. Increase the attractiveness of Ireland’s FDI and Financial Services offerings

PwC’s Submission states that there must be a clear strategy for enhancing Ireland’s reputation as an attractive location for foreign direct investment.  While welcoming the introduction of an exemption on foreign dividends, PwC calls for a broadening of the exemption to all dividends and foreign branch profits. The Submission also calls for the important need to align the Irish corporate tax system with the Pillar Two tax rules so as to avoid any distortions that may arise from these rules.

PwC’s Submission states that tax policy is a crucial tool available to the Irish Government to support the country’s financial services sector, improving Ireland’s competitiveness as a location for innovation and international business.  The Submission proposes tax measures to enhance Ireland’s position as a hub for sustainable finance, such as introducing tax incentives for Irish funds that prioritise investments with significant positive environmental impacts. It also calls for tax measures to increase private investment in the retail market, such as reviewing the taxation of Exchange Traded Funds and addressing the barriers to domestic household investment in funds.  It calls for tax measures to help mobilise private investment to position Ireland as a critical enabler of Sustainable Aviation Fuel (SAF). 

5. Further incentivise the green economy 

Recognising the urgency to achieve climate neutrality by 2050, PwC’s Submission proposes various tax incentives for businesses and households, including green clean technologies, renewable energy activities, offshore wind, green industrial parks and port infrastructure.  It also suggests tax measures to encourage households and communities to make changes in their energy consumption and behaviours, engaging in home retrofitting and using more sustainable transport methods.  It highlights the potential for businesses to support sustainable finance and proposes tax breaks for funds that focus on high-impact sustainable projects.