Budget 2027 came at a time when countries are grappling with economic uncertainty caused by higher energy prices and trade tensions, yet Ireland’s public finances remain buoyant. Record tax revenues have allowed the government to pump more than €9bn into the economy through increased spending on services and tax cuts.
While finance ministers around the world would love to be in the position of their Irish counterpart, there is a catch to all this largesse. The extraordinary resilience of Ireland’s Exchequer is down to corporation tax receipts from a handful of multinational companies. It is a remarkably fortunate position to be in but also a potentially risky one should these payments decline in the years ahead.
While many of the headlines surrounding Budget 2027 have focused on the €1.3bn handed to employees in personal tax changes, the government also laid some of the groundwork needed to finally mitigate some of that risk by channelling investment into domestic companies.
The Ireland Strategic Investment Fund could deliver a double return
Driving ambition
One of the eye-catching announcements was the decision to direct €1bn through the Ireland Strategic Investment Fund into the next generation of indigenous companies with the potential to become world leaders. That will allow the fund to write the kind of cheques that venture capital firms routinely do. Too often, startups either sell out too early because they cannot raise significant funding or they seek it from Silicon Valley investors. Investing through the fund could deliver a double return, with profits for the fund and the creation of larger Irish companies.
The main drawback is that the €1bn will be invested over three years, up to 2030. Ideally, the sum should be an annual commitment beyond that period.
A significant cut to the headline CGT rate must be considered
The Ireland Strategic Investment Fund announcement was the biggest and most interesting element of the package of measures aimed at entrepreneurs. We have no shortage of people creating innovative startups. Many argue that the capital gains tax regime discourages them from reinvesting, and they have been calling for an overhaul for years. Slash the rate and entrepreneurs may recycle their gains into new companies, adding jobs and wealth.
The response – a reduction in capital gains tax from 33% to 31% – is another welcome move, albeit a modest one. The cut is better than nothing, but probably doesn’t go as far as some would want. There has to be a point where a significant cut to the headline CGT rate is considered, even if it leads to a drop in receipts for a couple of years before the benefits of encouraging entrepreneurs to invest become apparent.
Small change
As with most Budgets, there were tweaks and tinkering around the edges of other schemes, such as extensions to startup investment reliefs and improvements to the R&D tax credit regime. These are specialist measures, but they matter to businesses making real decisions about where to invest, develop their intellectual property and employ skilled workers.
The proposed review of the various grants, incentives and enterprise supports could be more significant if it results in directing investment into Irish firms in a co-ordinated manner rather than spreading money in every direction without strategic focus.
Extraordinary corporation tax receipts allow Ireland to invest in the future
Overall, these initiatives are likely to be fleshed out in greater detail in the Finance Bill, but all are positive. They represent a move towards rebalancing the economy away from an overreliance on multinationals, which is something most commentators have been urging for years.
Ireland’s extraordinary corporation tax receipts have given the government time and resources to invest in the country’s future. Building a generation of Irish companies capable of competing internationally will take more than a handful of Budget announcements. It requires a sustained commitment to backing domestic enterprise, even when the results are neither immediate nor guaranteed. Budget 2027 suggests the government is beginning to understand what needs to be done. It still has to demonstrate, though, that it is prepared to do more to get there.
More information
Read the AB articles ‘Budget 2027: key measures’ and ‘New kids on the enterprise block’
ACCA’s flagship Accounting for the Future conference has a session on global economic resilience: the impact of geopolitics, trade and AI in 2027. Register to watch live on 24-26 November or on demand
