PwC launches 2025 Pre-Budget Submission - leveraging tax policies for sustainable business growth

Paraic Burke, Tax Leader, PwC Ireland, said: “Budget 2025 represents a critical opportunity for the Irish Government to support businesses and individuals in the face of global uncertainty and in the pursuit of growth opportunities. It also presents Government with the opportunity to secure and embed the remarkable economic growth achieved over recent years for the benefit of future generations. 

“PwC’s 2025 Pre-Budget Submission highlights the critical areas where tax policy can play a strategic role to support our macro-economy: Firstly, increasing the supply of affordable housing in light of Ireland’s acute housing shortage which is a significant threat to fiscal growth. Secondly, there is an urgent need for simplification of tax rules to reduce complexity in order to remain competitive on the international stage. Thirdly, supporting and encouraging investment in enterprise, from private businesses to foreign investors and in the financial services sector is critical. Finally, underlying all of these objectives is a commitment to meet Ireland’s 51% reduction in greenhouse gas emissions target by 2030 and we recommend tax policies that move us closer to this goal.”

PwC’s 2025 Pre-Budget Submission calls for support in the following key areas:   

Seriously tackle Ireland’s housing crisis 

PwC’s 2025 Pre-Budget Submission states that Ireland’s acute housing shortage is the most imminent issue facing both businesses and employees. It is the single largest impediment to attracting and retaining talent and if left unchecked it will impact workplace productivity. The Submission calls for Budget 2025 to address this reality with appropriate measures benefitting the scale and severity of this crisis. Measures for consideration include: extension of the ‘help to buy’ scheme; policies to encourage modern methods of construction; a temporary reduction in the VAT rate for construction materials, amongst others.

Simplify Ireland’s tax legislation 

PwC’s Submission stresses the urgent need for tax simplification. Ireland has an opportunity to be a first-mover in the global “decluttering” of tax rules movement which would make us more competitive and facilitate the ease of doing business. The Submission notes that it is beyond time for the main direct tax legislation (Taxes Consolidation Act 1997) to be reviewed. Within the legislation, there are a number of areas where simplification is urgently needed including our interest deductibility rules, taxing income under different schedules with multiple tax rates and simplifying reliefs such as the R&D tax credit and Employment Investment Incentive Scheme (EIIS) to make them more accessible to SMEs. Additionally, the expansion of real-time reporting to bring non-taxable benefits and expenses into scope (Enhanced Reporting Requirements) has created a significant compliance burden on employers, and one that is completely disproportionate to the value of the related benefits. An annual reporting regime for such benefits (without further expansions on the scope) would be a much better approach. 

More pro-growth measures and support for private business 

More measures are needed to stimulate growth and incentivise investment into private businesses. PwC’s recent EMEA Private Business Attractiveness Index ranked Ireland in 9th position out of 33 major EMEA countries. PwC’s 2025 Pre-Budget Submission highlights the importance of the domestic private business sector and the need to support employers with the cost of employment at a time when cost increases threaten job creation. PwC’s Submission  calls for tax incentives to help private businesses incentivise, retain and attract key talent, such as further share scheme mechanisms and simplifying the KEEP scheme. The Submission calls for tax measures to assist private businesses in securing investment and raising funds, such as allowing interest earned on loans by angel investors to be taxed at 12.5% (instead of 25%). It also proposes increasing the lifetime limit for the Revised Entrepreneur Relief to €5m (from €1m) and removing cash as a non-qualifying asset for Capital Acquisitions Tax Business Relief purposes.  

Increase the attractiveness of Ireland’s FDI and Financial Services offerings

PwC’s Submission states that there must be a clear strategy for enhancing Ireland’s reputation as an attractive location for foreign direct investment.  While welcoming the introduction of an exemption on foreign dividends, PwC calls for a broadening of the exemption to all dividends and foreign branch profits. The Submission also calls for the important need to align the Irish corporate tax system with the Pillar Two tax rules so as to avoid any distortions that may arise from these rules.

PwC’s Submission states that tax policy is a crucial tool available to the Irish Government to support the country’s financial services sector, improving Ireland’s competitiveness as a location for innovation and international business. The Submission proposes tax measures to enhance Ireland’s position as a hub for sustainable finance, such as introducing tax incentives for Irish funds that prioritise investments with significant positive environmental impacts. It also calls for tax measures to increase private investment in the retail market, such as reviewing the taxation of Exchange Traded Funds and addressing the barriers to domestic household investment in funds.  It calls for tax measures to help mobilise private investment to position Ireland as a critical enabler of Sustainable Aviation Fuel (SAF). 

Further incentivise the green economy 

Recognising the urgency to achieve climate neutrality by 2050, PwC’s Submission proposes various tax incentives for businesses and households, including green clean technologies, renewable energy activities, offshore wind, green industrial parks and port infrastructure. It also suggests tax measures to encourage households and communities to make changes in their energy consumption and behaviours, engaging in home retrofitting and using more sustainable transport methods. It highlights the potential for businesses to support sustainable finance and proposes tax breaks for funds that focus on high-impact sustainable projects.

Paraic Burke concluded: “Despite strong tax receipts, some of which are uncertain in the years ahead, investing for the future is vital. Encouraging growth in a sustainable manner is key to creating secure employment and meeting our climate objectives. Tax policies, if wisely chosen, could be critical to delivering success in addressing our housing and climate challenges.”      

Ends

Notes to editors:

More detail on specific measures proposed:

Delivering against energy transition objectives:

• Expand tax reliefs (deductions/credits) for investment into companies carrying on qualifying renewable energy activities - encouraging more private capital to flow into sustainable projects;

• Tax reliefs for corporates investing into companies setting up innovation hubs focused on development of new green, clean technologies (including heat pumps, floating offshore wind, renewable hydrogen production, sustainable aviation fuel);

• Tax incentives for companies setting up new green energy industrial parks;

• Enhanced tax depreciation to encourage investment in our port infrastructure;

• Tax incentives for Irish investors investing into Irish funds that prioritise projects with significant environmental impacts;

• More state backed loans to facilitate investment in green energy investment by corporates, especially SMEs;

• Expansion of grant regime to include used as well as new electric vehicles and the installation of charge points;

• Reduced stamp duty on the acquisition of energy efficient homes or a refund of stamp duty where retrofit is undertaken within a period of 5 years of purchase;

• Ability for households to get a mortgage or home improvement loan interest relief on loans for retrofitting activities;

• An extension of the ‘help to buy’ scheme to include ‘help to insulate’ to assist homeowners with retrofit activity.

• More favourable VAT rates on installation of charge points for EVs across the country to improve charging infrastructure.

Supporting Private Businesses:

• Interest earned on loans to private businesses by angel investors to be taxed at 12.5% (instead of 25% currently);

• Increase lifetime limit for Entrepreneurial Relief to €5m (from €1m currently);

• Removal of surplus cash as a non-qualifying asset in trading businesses for Capital Acquisitions Tax Business Relief purposes;

• To attract and retain key talent PwC proposes that where a company undertakes to rent a property to an employee that the rental income be taxable at 12.5% (instead of 25%) and that where the rent is at less than market rent, relief from BIK would apply only on the element of ‘underpaid’ rent;

• The establishment of Employee Ownership Trusts;

• KEEP (Key Employment Engagement Programme) requires attention in order for the scheme to be more attractive. In particular, the scheme should facilitate group structures; 

• Extend the Special Assignee Relief Programme (SARP) to 2030;

• The current rate of Capital Gains Tax (33%) is an inhibitor to capital transactions. A reduced rate would not only facilitate increased transactions, but also stimulate a considerable increase in tax yield.

Growing the financial services sector:

• PwC’s Submission calls for Ireland’s position as a world leader in sustainable finance to be strengthened by using tax policies to promote Ireland as a leading hub for a robust and credible voluntary carbon market, a vital tool for financing global greenhouse gas emission reductions;

• To enhance Ireland’s reputation as a hub for investment funds, the submission proposes alleviating the complexities in repatriating income from holding companies to partnership structures, which are frequently used to pool investor capital.  Currently these complexities are a significant obstacle to inward investment in Ireland;

• The Submission highlights the mismatch between Ireland’s position as a global hub for the funds industry and the low levels of domestic household investment in investment funds. The Submission highlights targeted tax measures to encourage more retail investment including reducing the rate of investment undertaking tax to 33% from 41%.

• To position Ireland as a critical enabler of Sustainable Aviation Fuels (SAF), the submission proposes tax reliefs including for investment in companies developing SAF technologies; tax credits for Irish distributors/manufacturers of SAF as well as the  expansion of accelerated capital allowances.

Attracting foreign direct investment:

• The Submission states that continuing to attract foreign direct investment from a broad range of international companies must remain a key priority for Government. As a consequence of Pillar Two, simplifying the Irish tax legislation is a must. But the Government should also focus on the non-tax factors to ensure that Ireland is at the forefront in the intensifying battle for global investment.