Budget 2023: Call to simplify Irish tax landscape

Budget 2023 needs to reform, enhance and simplify the Irish tax landscape to alleviate the cost of living burden, while encouraging future investment and growth in Irish businesses.

That’s according to the latest pre-Budget 2023 submission from Deloitte.

Deloitte argues Budget 2023 should aim to strategically position Ireland to address the key uncertainties in the global economic and tax landscape.

“Budget 2023 should aim to strategically position Ireland to take full advantage of unique opportunities presented by future uncertainties”

It says it should focus on sustainable growth in key areas such as knowledge and innovation focused industries and rapidly growing indigenous businesses, according to Deloitte Ireland’s pre budget 2023 recommendations document that was published today. 

Prepare for these mega trends

While the Deloitte pre budget submission addresses a range of issues spanning personal taxes, entrepreneurship, inward investment and innovation, a number of “mega trends” can be identified in the current global tax and economic landscape including:

  • Future success and growth in the SME space: Measures such as a 20% rate of tax on certain dividends to encourage growth in businesses and retention of cash for investment would be welcome, as would  immediate changes to the Employment Investment Incentive and Start up refunds for Entrepreneurs schemes. Such changes would assist SMEs in creating sustainable growth and would be a practical indicator of support and investment in future success from the current Government.
  • Labour force pressures and personal tax regime: Reducing the 52% marginal tax rate, combined with reviewing the Universal Social Charge and PRSI to simplify both systems. Enhancing the Special Assignee Relief Programme, improving the Key Employee Engagement Programme and aligning tax credits, bands and flat rate allowances with inflation will ensure that taxpayer net pay is reflective of the rising cost of living
  • Inflationary pressures and the cost of living: Revisions to tax bands and flat rate allowances would assist taxpayers in addressing inflationary pressures. The reintroduction of bin and service charges tax relief and enhancements to the Rent a Room relief and childcare services relief, would also help to address the rising cost of accommodation and to support parents in sourcing childcare as they return to work.
  • Climate change: Further enhancements could be made to a range of tax incentives and reliefs targeted towards green energy and renewables. The reintroduction of reliefs for green investments, extension of tax relief for specific expenses incurred on renewable energy projects and the use of VAT measures would ease the cash flow burden on renewable energy developers.
  • Globalisation and foreign business investment: A wide range of simplification measures should be considered to make the Irish corporation tax system more taxpayer and investor friendly including reform of the existing (and complex) rules on interest relief (i.e. tax relief on debt funding) and an overhaul of double taxation relief. Such changes, combined with continued stakeholder engagement on imminent developments would undoubtedly assist multinational groups in making future investment decisions in the face of continued uncertainty posed by international tax reform. 

“Ireland has been a major beneficiary of globalisation, one of the important factors being our corporate tax regime and the ever-present focus on providing taxpayers and businesses with clarity and certainty,” said Lorraine Griffin, head of Tax at Deloitte.

“Recent developments on international tax – and in particular the yet to be agreed 15% global minimum tax rate – will to some degree level the playing field with other competitor countries. In addition, inflationary pressures have dominated the conversation in recent weeks and months with inflation of 7.8% the highest since 1984.

“While all eyes will be on the immediate changes Budget 2023 will bring for individuals and companies, an enhanced focus must be placed on measures that will provide for sustainable growth in the medium to long term, for example, through changes which will future proof tax reliefs for Research and Development and by “blue sky” thinking in relation to the attractiveness of long term renewable energy projects, to name but a few.” 

“Budget 2023 should aim to strategically position Ireland to take full advantage of unique opportunities presented by future uncertainties, while at the same time ensuring a stable and attractive environment for investment going forward.”

John Kennedy
Award-winning ThinkBusiness.ie editor John Kennedy is one of Ireland's most experienced business and technology journalists.