Businesses across Ireland are facing sustained cost pressures, with rising labour and operational costs hitting competitiveness, according to Chartered Accountants Ireland as it publishes its pre-Budget Submission. New survey data shows the scale of the challenge, with 40% of SMEs identifying staff costs as their primary financial challenge, with a further 30% citing rising operational costs. These findings underline the scale of the issue facing the business community, making it harder for them to compete, invest and grow.
Increasing complexity in the tax system is adding to administrative burdens, diverting time and resources away from productive activity and creating additional cost pressures for businesses, particularly SMEs.
Supporting workers and businesses through income tax reform
The Institute’s submission calls for indexing income tax thresholds and credits to inflation to protect real wages and address fiscal drag. Chartered Accountants Ireland notes that these reforms are essential in the current environment, where cost pressures are acute and businesses are increasingly challenged in attracting and retaining staff.
Cróna Clohisey, Director of Members and Advocacy at Chartered Accountants Ireland said
“Protecting real wages must be the starting point for Budget 2027. Without action, workers will continue to see their take-home pay eroded while employers face growing pressure to increase wages. Indexing income tax thresholds and credits in line with inflation is a practical step that will help support both workers and employers in the current cost environment. Without this, we risk putting further strain on employers and undermining competitiveness in the economy.”
Reducing unnecessary tax costs for businesses
The submission highlights specific areas where the tax system is creating unnecessary cost and complexity for businesses, for example:
- Enhanced Reporting of certain non-taxable payments on a real-time basis remains a major compliance burden for smaller businesses in particular.
- Year-on-year increase in the length of the corporation tax return (Form CT1) and the need to provide a means for businesses to report on a simplified basis where appropriate.
Clohisey added:
“A key example of well-intended policy driving complex outcomes is the Enhanced Reporting Requirements – specifically the demand for real-time reporting of in-scope payments. ERR has added substantially to the costs and compliance burden of businesses. Moving to a periodic reporting basis would ease that burden while still supporting compliance. This is a straightforward and practical reform that would make a real difference, particularly for SMEs.”
From the perspective of professional service providers, two elements of the Irish tax framework raise concerns in relation to equity and warrant consideration:
- Eliminating benefit-in-kind charges on employer-funded professional subscriptions.
- Removing the 3% USC surcharge on certain non-employment income to address an arbitrary distinction between different forms of income.
Cróna Clohisey said
“It is important to address parts of the tax system that are adding unnecessary costs. For example, the current treatment of professional subscriptions as a taxable benefit increases costs for employers and does not reflect the value these qualifications bring to businesses and the wider economy.”
“Removing these unnecessary costs would support skills development, reduce pressure on employers, improve fairness and better align Ireland’s tax system with international practice.”
Driving investment through capital gains tax reform
The submission highlights the need to strengthen Ireland’s investment environment, with a particular focus on capital gains tax and the broader investment framework by:
- Establishing a pathway to a more competitive CGT rate.
- Reforming the taxation of retail investment, including through the introduction of an Investment Account.
- Supporting capital formation and improving market liquidity
These measures are designed to ensure that Ireland remains an attractive location for investment and that businesses have access to the capital needed to grow and innovate.
Clohisey concluded
“A more competitive capital gains tax regime is essential if Ireland is to support investment and encourage long-term economic activity. The current rate remains high by international standards and has a material impact on business and investment decisions.
“We are recommending that the rate of CGT in Ireland should be progressively reduced to at least 20% to support capital formation, improve market activity and encourage more commercially driven investment decisions. This is critical to supporting business expansion, innovation and long-term economic growth.”
“Without action in Budget 2027, cost pressures and competitiveness challenges will continue to intensify for Irish businesses.”
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