“I am very optimistic for the future of business in Ireland”

Minister for Finance Michael McGrath outlines his expectations for the Irish economy and business in 2024

Over the past number of years, our economy and society have weathered multiple unprecedented challenges: Brexit, a once-in-a-century pandemic followed by the Russian invasion of Ukraine, and the associated impact on energy prices and inflation. 
Yet despite all these headwinds and reinforced by Government support, our economy has proven remarkably resilient, with our labour market essentially at full employment and public finances on a positive trajectory.

As we look ahead to 2024, I am encouraged by the strength our economy has demonstrated in the wake of so many external shocks. 

Next year, Modified Domestic Demand (MDD) – my preferred measure of the domestic economy – is forecast to grow by 2.2 per cent. While this is lower than the growth we have experienced in recent years, it compares favourably with the outlook for many of our competitors.

The increase in financing costs facing businesses because of this monetary policy tightening is unfortunately a challenge Irish business will continue to contend with in 2024. 

This greater burden comes at a time in which businesses are already facing inflation at multi-decade highs. 

Thankfully, there is some evidence that we have now turned a corner on inflation. Inflation is expected to continue to ease over the coming months with the rate projected to fall just below three percent next year. 

It is important to note that the outlook for ‘core’ inflation – which excludes energy and unprocessed food – has proven to be more persistent as inflationary pressures have become broader. 

Looking at the international picture, the balance of risk is very much tilted towards the downside. 

A small, open economy like Ireland is particularly vulnerable to global economic developments. Geopolitical tensions and further changes to monetary policy are key risks facing our economy over the coming period.

As Minister for Finance, one of my priorities is to ensure that businesses have the support they need amidst all these challenges. 

In the lead-up to Budget 2024, I examined the tax reliefs and supports available to Irish businesses and met with, and listened to, the views of stakeholders from across the country. 

Based on this, I announced a wide-ranging package of measures to support enterprise in Budget 2024.  

Among these measures, I am increasing the Research and Development (R&D) Tax Credit from 25 percent to 30 percent. The first-year payment threshold is also being doubled from €25,000 to €50,000, which will provide valuable cashflow support to companies engaged in smaller R&D projects. 

These amendments will ensure that Ireland remains competitive in attracting employment and investment in R&D. 

I am also introducing a new targeted Capital Gains Tax relief that will allow angel investors to benefit from a reduced 16 percent rate of CGT when they dispose of a qualifying investment for gains up to twice the value of their investment. 

This relief aims to encourage investment in this important sector of our economy, helping these enterprises access the necessary capital to grow and develop.

In the same vein, I am also enhancing the Employment Investment Incentive Scheme by standardising the investment period to four years for all investments, and doubling the amount an investor can claim relief on for four-year investments to €500,000. 

Further changes are also being made to the scheme to ensure that it is compliant with the new EU General Block Exemption Regulation. 

To support Irish SMEs in engaging key employees, I have recently commenced the outstanding Finance Act 2022 amendments to the Key Employee Engagement Programme, following receipt of State aid approval from the European Commission. 

This includes an extension of the scheme to the end of 2025 and doubling the amount of issued, but unexercised, qualifying shares a company can hold from €3 million to 
€6 million. 

In my engagement with stakeholders, a clear message has emerged: businesses find the administrative requirements of tax supports and schemes to be complex. 

To examine this issue, Revenue will be establishing a subgroup of the Tax Administration Liaison Committee (TLAC). 

This group will examine Revenue-administered tax schemes and reliefs for business, with a focus on identifying any opportunities to simplify and modernise the administration of business supports. It will report on its findings in the course of 2024. 

My department will also undertake several reviews in 2024 to further examine how specific enterprise support reliefs and schemes can work better for Irish business. 
I am very optimistic for the future of business in Ireland. The suite of enterprise tax measures announced in Budget 2024 is a sign of our commitment to ensuring that Ireland is an attractive location for start-ups and scale-ups across a range of sectors. 

Michael McGrath, FCA, is Minister for Finance and a TD for Cork South Central