Ireland’s economic future hinges on sustaining FDI, reforming regulations and tackling infrastructure issues to secure continued growth. Brendan Murphy explains why
“It’s FDI, stupid” to paraphrase a 1990s US election slogan. We are a relatively small country – we need foreign direct investment to keep flowing in whether it is from the US or other parts of the world, including China.
Over 80 percent of our corporation tax receipts and over 50 percent of our payroll tax receipts are generated by these companies. That money benefits all of us – consumers, savers and workers. We must not lose the golden goose.
This will require a long hard look at our infrastructure challenges in the coming decades, including some of the well-documented planning restrictions that can frustrate international businesses planning to set up in Ireland.
The recent Government Budget missed an opportunity to champion Ireland’s businesses and entrepreneurs, featuring very few improvements to capital gains tax rules to encourage either.
The cost of establishing and running a business continues to spiral. We would strongly support calls for improvements to entrepreneur relief to reward business owners and an easy-to-use share-based remuneration scheme that would allow those businesses to retain and reward key talent.
Budget 2025 referred to four major issues that could make a real difference: share-based remuneration, the R&D tax credit, interest deductibility and the tax climate for the funds sector.
In all four cases, however, the Government opted only to reference new and ongoing reviews rather than introduce any new tax policies. We think these should be top priorities for any incoming government to show some real tangible decisions from these reviews.
Airport cap
The airport cap has highlighted a key issue with planning laws and regulations in Ireland.
This 17-year-old rule was introduced when Terminal 2 was built during a very different era. With a growing population and improvements to airport infrastructure, this cap should have been lifted years ago.
We understand the need to manage this from an environmental perspective, but there is also a need to be mindful of the business travel that is crucial to maintaining our FDI levels and ensuring we support our hospitality sector, which felt forgotten and overlooked in the recent Budget.
We need to boost our tourist and investor numbers – not potentially put them off with higher air fares and fewer flights.
Housing deficit
There is no doubt housing will be a key battleground during this election and a key focus for the new government of whatever political makeup.
In the recent Budget, the government outlined a roadmap for how current and future considerations from bank share sales will be allocated, emphasising a strong commitment to infrastructure spending.
This investment is critical for achieving Ireland’s ambitious housing targets, with all agencies and commentators signalling that 60,000 new housing units will need to be completed annually to address the chronic undersupply.
Despite these good intentions, however, planning delays and higher building costs continue to be significant constraints to meeting these targets.
Some builders are unable to commence building unless they know they can deliver houses and apartments people can afford to buy.
In addition to the generous budget allocations, planning regulations need to be closely examined and overhauled.
Tangible policies over reviews
To maintain Ireland’s status as an attractive FDI destination, decisive action is required.
Infrastructure challenges, regulatory reform and thoughtful incentives for both entrepreneurs and international companies must be prioritised by any incoming government.
Ireland’s economic future relies on supporting FDI, addressing the housing crisis and creating a business-friendly environment.
If we are serious about growth, it’s time to replace reviews with real policy changes that meet the needs of today’s global economy.
Brendan Murphy is Head of Tax at Baker Tilly Ireland
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