Seriously tackling Ireland’s housing crisis and incentivising the green economy should be top of the Irish Government’s agenda for Budget 2025, it has been recommended.
As well as simplifying Ireland’s tax legislation the Government needs to act fast on the housing issue which is affecting both businesses and their employees, PwC recommends in its pre-Budget 2025 submission.
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.
“Tax policies, if wisely chosen, could be critical to delivering success in addressing our housing and climate challenges”
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.
Tax policy plays a critical role
“PwC’s 2025 Pre-Budget Submission highlights the critical areas where tax policy can play a strategic role to support our macro-economy,” said Paraic Burke, tax leader at PwC Ireland.
“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.”
Housing issue is costing businesses key workers
The issue of housing as an issue for Irish businesses was also highlighted by Dublin Chamber’s latest survey for Q1 2024 shows that the availability of affordable housing remains the greatest concern for Dublin businesses. About two out of every three firms (62%) have lost employees or had prospective employees not take a job due to lack of affordable housing in Dublin. The lack of affordable housing, in turn, makes it difficult for firms to attract, retain and upskill staff.
“Despite the extensive and substantial government supports to promote the construction of affordable housing, the volume of construction is insufficient to meet demand,” Aebhric McGibney, director of Public and International Affairs, at Dublin Chamber said.
“Government should revisit the effective ban on building in certain parts of the Greater Dublin Area, which are based on outdated population figures, and encourage local authorities to provide for more residential zoned land in towns that are well served by public transport options. In addition, transport planning for the region needs to be revised for the region to keep pace with housing and population growth, with a view to bringing forward public transport services and projects that have been placed on the long finger in existing plans.”
The Q1 Business Outlook Survey shows that 30% of firms have temporarily subsidised or provided accommodation for employees to allow them to take a job in Dublin. Flexible and remote working remaining the most effective measure in attracting and retaining staff, followed by competitive salaries.
“Housing has long been a simmering issue for businesses, now this has taken a turn into the realms of businesses subsidising housing to retain and attract talent in Dublin. This should never be the case, and will have adverse effects on Dublin being a competitive place to start and indeed grow a business,” McGibney said.
Simplify taxes, boost FDI
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.
The pre-Budget submission also stresses the need to stimulate growth and incentivise investment into private businesses. 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.
PwC’s Submission also 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.
Incentivising 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.
“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,” Burke said.
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