Budget 2027 has delivered measures for employees, with increased tax credits, wider tax bands, rent tax credits and an increase in the minimum wage, all providing welcome support at a time when household finances remain under pressure, says the Cork Business Association (CBA).
However, the picture is less positive for businesses, according to the business organisation.
Dave O’Brien, board member and finance expert at the Cork Business Association and Head of Tax at Xeinadin, said: “From an employee perspective, Budget 2027 is to be welcomed. The €1.3 billion income tax package will provide meaningful support to people at a time when many households are struggling with the cost of living.
“From a business perspective, however, there are some small wins, but overall the measures do not go far enough. The Minister spoke about a Budget where ‘risk is repaid’. Unfortunately, we do not believe that those taking risks, investing and generating employment have benefited in any material way from this Budget.”
One of the headline changes for businesses is a reduction in the Capital Gains Tax rate from 33% to 31%. However, the sale of development land will continue to be subject to the 33% rate.
Employers will also see some relief from the increase in the minimum wage, which will rise to €14.94 per hour, in the form of an Employers PRSI reduction. The threshold at which the higher rate of Employers’ PRSI applies will increase to €600 per week. Employees earning below that threshold will attract an Employers’ PRSI rate of 9.15%, rather than the higher rate of 11.40%.
The CBA said that while this will help offset some of the additional employment costs associated with the minimum wage increase, businesses continue to face significant pressure from rising operating costs.
There was some relief on the environmental taxation front, with increases in carbon taxes stalling. This will be particularly relevant for businesses with significant energy requirements, although Mr O’Brien cautioned that the underlying climate challenges have not gone away.
“Businesses operating in energy-intensive sectors will welcome the fact that carbon tax increases have stalled. But the climate issue has not disappeared, and businesses will continue to face pressure to transition to more sustainable models.”
One area where Ireland continues to perform strongly is research and development. Companies engaged in R&D activity are seeing increasingly significant supports, something the CBA believes is important as Ireland seeks to strengthen its position as an innovation hub within the European Union.
“Ireland is fast becoming one of the key R&D hubs in the EU, and it is positive to see continued support for companies investing in research and development. This is an area where we need to maintain our competitiveness,” said Dave O’Brien.
The organisation also welcomed changes to the way companies pay preliminary tax, which should improve cash flow and reduce administrative burdens. Further changes to the reporting of employee expenses, including the option to report expenses on a monthly basis, should also make compliance easier for businesses.
Elsewhere, inheritance tax thresholds have been increased, although only marginally.
“There has been some movement on inheritance tax thresholds, but not enough to represent a significant change in the overall tax position,” said Mr O’Brien.
The Government has also committed a record €655 million to the Sustainable Energy Authority of Ireland (SEAI) to support energy upgrade schemes in homes and communities.
The commitment to major infrastructure projects in Cork has been welcomed by the Cork Business Association.
“The Government’s commitment to funding the Cork Commuter Rail programme, BusConnects and the M28 Cork to Ringaskiddy motorway is very welcome. These are critical projects for Cork’s future economic development and connectivity.”
The continued commitment to the regeneration of urban areas is also positive, particularly as Cork City seeks to attract more residents, businesses and investment into the city centre.
One of the more significant disappointments for the Cork Business Association is the lack of changes to the Living City Initiative.
The CBA has consistently argued that the tax relief should be extended to residential properties on the main streets of Cork City, where the cost and complexity of bringing vacant or underused buildings back into residential use can be a major barrier.
“The lack of any improvement to the Living City Initiative is disappointing,” said Dave.
“We have repeatedly highlighted the fact that the tax relief does not apply to renovating residential properties on the main streets of Cork City. This is a relatively simple change that needs to happen.”
The absence of additional measures specifically aimed at encouraging city-centre living represents, in the CBA’s view, a missed opportunity at a time when Ireland continues to face significant housing pressures.
The CBA said the introduction of the 7% derelict property tax is a positive measure and one that it has supported.
“It may encourage owners either to renovate derelict properties or bring them to the market,” said Mr O’Brien. “However, implementation will be critical.”
In its first year, the measure will apply only to towns and cities with populations of more than 4,000, with local authorities responsible for determining whether a property meets the definition of derelict.
“That is where some of the difficulties may arise,” Mr O’Brien said. “There will be situations where there are legal reasons why a property cannot be sold, or where the economics simply do not make sense for an owner to renovate it. We will need to see how the legislation works in practice.”
For the Cork Business Association, the overall verdict on Budget 2027 is mixed.
There are measures that will help businesses, particularly around Employers’ PRSI, R&D, administration and cash flow. The major infrastructure commitments for Cork are also significant.
However, the broader concern is that the Budget has not done enough to address the cumulative cost of doing business or provide a stronger incentive for entrepreneurs and employers to invest and create jobs.
“The CBA will continue to champion businesses in Cork, but this Budget has not moved the dial sufficiently and, unfortunately, I would not describe it as a pro-business Budget,” said Mr O’Brien.
“Employees should be happy with the personal tax changes, and they were needed. But we also need to continue pushing the Government to consider the overall cost of doing business in Cork and Ireland and, importantly, to find ways to reward those who take risks, invest and create employment.”