Budget 2027: The prerogative for backing Ireland’s businesses

PwC’s Mairead Harbron says Budget 2027 should support Irish private businesses through tax reform, investment incentives, entrepreneurship, innovation and SME competitiveness.

Ireland’s economy is in a position of considerable strength. Strong tax receipts, budget surpluses and growing national reserves provide Government with an opportunity to make strategic choices that support sustainable growth.

For Ireland’s private businesses, this Budget presents a chance to address long-standing barriers to expansion, investment and competitiveness.

Ireland’s economic success has been significantly bolstered by foreign direct investment. Yet, to ensure long-term resilience, we need a new strategic approach to both nurture and retain Irish-owned multinationals, while also developing a strong indigenous sector that has ownership and decision-making rooted in Ireland.

While Ireland excels at fostering startups – thanks to a robust university sector, entrepreneurial spirit, and State support – the challenge now is scaling these companies into global players.  The long-term growth and resilience of Ireland’s indigenous business sector is critical, providing a vital pathway for innovation, entrepreneurship and wealth creation.

Budget 2027 should therefore prioritise measures that enable Ireland’s indigenous businesses to invest, grow and remain competitive in an increasingly challenging global environment.

Tax simplification

One of the most immediate areas where Government can support smaller businesses is through tax simplification. Many small and medium enterprises (SMEs) face significant administrative burdens that divert resources away from innovation and growth.

Simplified, pre-populated corporation tax returns for smaller companies, accompanied by clearer legislation and Revenue guidance, would reduce compliance costs and improve certainty.

In an economic environment where management time is increasingly valuable, reducing bureaucracy can be as important as reducing tax rates.

Incentivising entrepreneurs

Investment is another critical challenge. Ireland has accumulated substantial fiscal reserves, yet private investment also needs encouragement. Measures that help individuals save and invest for the long term could unlock additional capital for productive enterprise.

Introducing a broad-based savings and investment account is very welcome and combined with reforms to the taxation of investment products, would support a stronger investment culture and help channel private capital towards Irish businesses and future growth opportunities.

Budget 2027 should also strengthen incentives for entrepreneurship. Founders who build and scale businesses over many years are central to Ireland’s economic success, yet the tax system does not always reward long-term business development.

Increasing the lifetime limit under Entrepreneur Relief from €1.5 million to €5 million would send a strong signal that Ireland values ambition and enterprise. Similarly, a targeted 20% Capital Gains Tax rate for qualifying investments in active trading businesses would encourage productive investment and support succession planning in privately owned firms.

Employee ownership

Employee ownership could also play an important role in strengthening Irish enterprise. Many family-owned and founder-led businesses face succession challenges, and employee ownership trusts offer an opportunity to preserve value and ownership within Ireland.

Making these structures more practical and accessible would provide an alternative pathway for business continuity while rewarding employee commitment.

Attracting and retaining talent remains one of the biggest challenges for growing firms. Rising wage pressures, housing costs and competition for skilled workers continue to impact businesses of all sizes.

A temporary PRSI rebate of up to 50% for employees earning up to €26,000 would help ease employment costs while supporting workforce stability. In addition, increasing the annual limit for approved profit-sharing schemes, which has remained unchanged for decades, would allow businesses to offer more meaningful incentives aligned with modern workplace expectations.

Simplifying the small benefit exemption would further reduce administration while helping employers recognise and reward staff.  Ensuring that work pays better should also be addressed via changes to the personal tax regime, particularly by extending the standard rate income tax band. Although an expensive tax expenditure, this will have knock-on benefits for all sectors, attracting and retaining talent.

Innovation policy

Innovation policy also needs to evolve. Traditional research and development incentives are important, but many businesses require support to adopt and commercialise existing technologies rather than invent entirely new ones.

A refundable incentive linked to expenditure on digitalisation, decarbonisation and technology deployment would address this “missing middle” and help smaller firms improve productivity and competitiveness.

Likewise, 100% first-year capital allowances on qualifying artificial intelligence and technology investments would encourage businesses to modernise operations, develop new services and create new revenue streams.  In addition, R&D outsourcing rules should better reflect how businesses actually collaborate – for example, by allowing connected-party outsourcing (with appropriate safeguards) and increasing the third-party cap from 15% to 30%.

Housing infrastructure

Beyond taxation and innovation, the broader business environment must improve. Housing shortages, infrastructure constraints and high energy costs are affecting companies’ ability to recruit, retain employees and expand operations.

Private enterprise cannot scale without sufficient housing and reliable infrastructure.

Measures that accelerate housing delivery, encourage the refurbishment of vacant and derelict properties, and support modern methods of construction would benefit businesses as much as households.

Energy security

Energy security has also become a major competitiveness issue. Recent global instability has once again highlighted Ireland’s exposure to imported energy costs.

SMEs are particularly vulnerable to energy price volatility, which can significantly impact margins and investment decisions.

Accelerated capital allowances for energy-efficient equipment, incentives for clean technologies and support for renewable energy projects would help businesses manage costs while contributing to Ireland’s climate objectives.

An environment to scale

Ultimately, Budget 2027 should be a delivery-focused budget. Ireland’s fiscal strength creates an opportunity to tackle the structural challenges that constrain businesses every day.

By simplifying taxation, supporting entrepreneurship, encouraging investment, addressing housing and energy constraints, and helping firms adopt new technologies, Government can create the conditions for a stronger and more resilient private business sector.

The success of Ireland’s economy in the years ahead will depend not only on attracting global investment, but also on empowering Irish businesses to grow, innovate and compete on the international stage.

Top image: Mairead Harbron, Tax Partner, PwC Ireland