Budget 2027

Following today's Budget 2027 announcements by the Government, our experts share their insights on measures around Ireland's economic outlook, R&D and innovation, Ireland's corporate tax regime, employers and private clients.

Thomas Pugh, chief economist at leading audit, tax and consulting firm RSM Ireland said: “Budget 2027 turned out to be a bigger affair than the coalition government would have liked. The tax package was increased to €1.65bn compared to initial plans for a €1.5bn in order to keep fuel excise duty cuts in place until the spring. The government finances can clearly absorb the relatively small increase in spending, but the risks from inflation and geopolitics are rising, meaning this may not be enough to quell demands for support.

“Today’s budget was far more focused on the cost-of-living than planned as a swathe of energy measures, increased subsidies and cuts to childcare costs, and the uprating of income tax allowances were announced. These will all go some way to supporting households either through directly cutting inflation or supporting incomes. On the details, we tentatively estimate that these measures will reduce average CPI inflation by around 0.25ppts in 2027, but we will need to crunch the numbers more precisely in the coming days and some of this will be offset by a big hike in tobacco duties.

“Those big increases in government support, combined with high savings and a robust labour market are exactly why we think the domestic economy can keep growing by around 3% this year and next despite the energy shock.

“That said, the risks to inflation are still weighted to the upside. A €8.65bn fiscal stimulus at a time when the domestic economy is already strong, the labour market is close to full employment, and is increasingly coming up against capacity constraints, risks adding to inflationary pressures. Indeed, measures of domestically generated inflation suggest that disinflation may have already stalled over the past year.

“Turning to the public finances more broadly, the government should be cautious. Over half of corporate tax receipts come from just 10 multinational firms and 20% of workers’ pay around 80% of income tax. Given the narrow tax base, the big risk here is if the US administration pursues policies designed to discourage companies from reporting profits abroad, this would leave the public finances facing a significant shortfall as suggested by the underlying deficit. Fortunately, Ireland’s public finances are far healthier than our European peers, which would give the government some cushion against any potential loss of revenues.

“Ultimately, today’s Budget ended up being much more significant for households than the government initially intended. Going forward, we expect strong government spending will continue to support growth, but risks overheating the economy. In any case, we expect Modified Domestic Demand growth of around 3% in 2027, similar to our expectation for this year.” 

Paddy Stapleton, head of tax at leading audit, tax and consulting firm RSM Ireland said: “The R&D changes announced in Budget 2027 should make the tax credit more flexible, accessible and effective, as well as strengthen Ireland’s position as an attractive place for investment. These changes will positively impact SMEs through to large multinationals, while also reducing costs and administrative burden for companies claiming the relief.

“The 5% increase in base expenditure will mean more innovation support for all companies accessing the regime. While the increase in thresholds for those that leverage outsourced support address a long-standing limitation of the regime and recognise the collaborative nature of modern innovation.

“For the life sciences sector, the proposal to recognise regulated clinical trials as satisfying the science test will reduce administrative burdens and provide more certainty for those participating in global clinical trial programmes in Ireland. This is particularly key given the uncertainty driven by US tariff changes over the last 18 months.

“However, it is a missed opportunity that Budget 2027 did not include broader supports for businesses investing in AI adoption and other emerging technologies. While these investments may not always meet the criteria for R&D tax relief, they are increasingly critical to driving productivity, efficiency and innovation. A complementary incentive to support businesses in deploying AI at scale would have helped accelerate the next wave of business transformation and should be a priority for government.” 

Liam Kenny, tax partner at RSM Ireland reacts to the CAT changes in Budget 2027: “Nominal increases in the CAT free lifetime thresholds is not enough. Widespread reform is needed to bring this out of step regime in line with modern family circumstances, and asset values. Families across Ireland are facing challenges for succession planning right now, so tinkering with the thresholds doesn’t provide the support they need.” 

The Minister announced from January 2027, employers will be able to chose between continuing to operate Enhanced Reporting Requirements (ERR) on a real-time basis or move to a monthly filing frequency.  

Caoimhe Neary, tax partner at RSM Ireland reacts: “Pragmatism relieves reporting burden for employers. The revenue will still get the information it needs, but employers will have the flexibility from 2027 to meet their ERR reporting obligations in a way that reflects the realities of running a business.”