The Irish Tax Institute welcomes the personal tax changes announced by the Minister for Finance, Jack Chambers TD in today’s Budget.

The increases to the main tax credits and the standard rate cut-off point as well as the 1% reduction in USC build on the progress made last year in reducing the burden on middle income earners and making Ireland a better place for workers and businesses alike.

Reacting to Budget 2025, Irish Tax Institute President Aoife Lavan said: “The cost of employment is a key consideration in investment decisions and if Ireland wants to attract the next wave of multinationals, it is critical that our employment taxes are competitive. Today’s changes will make Ireland a more attractive location for business.”

The Institute also welcomed the changes to the Small Benefit Exemption which raises the limit on the value of non-taxable employee benefits from €1,000 to €1,500 and increases the number of allowable benefits from two to five per annum.

“The increase in the number of allowable benefits will be welcomed by all employers and employees. Having the flexibility to reward workers and to mark their significant life events such as marriage or bereavement is an important factor in creating a good work culture. It’s important that businesses can reward their staff in the current tight labour market,” said Ms Lavan.

The Institute also welcomed the increase in the first payment threshold in the R&D tax credit which will help cashflow in small innovative companies. The increase in the thresholds for relief available under the Employment Investment Incentive (EII) and the Start-Up Relief for Entrepreneurs (SURE) will make these measures more attractive.

“But the main difficulty with these reliefs and other SME measures is that they are too restrictive and administratively complex for the start-ups and small enterprises that they are intended to support. We hope some of the legislative changes that we recommended in our Pre-Budget Submission will be included in the Finance Bill,” she said.

Ms Lavan also welcomed the Minister’s decision to change the rules on the €10 million cap on CGT retirement relief on the transfer of farms and family businesses to the next generation. She said she awaits the detail on the operation of the new rules in the Finance Bill.

The Fiscal Outlook contained in the Budget documentation warns of Ireland’s vulnerability to developments within the EU where increased competition for FDI could trigger a subsidies race in which smaller countries would lose out to the deeper pockets of larger member states. In that regard, the Institute welcomed the Minister’s commitment to reducing complexity in our tax code.

The Institute has worked with Government officials on the forthcoming legislation to introduce a participation exemption for foreign dividends which is due to come into effect on 1 January 2025 and will also take part in the recently launched consultation on the tax treatment of interest in Ireland.

“Our plea is to move at pace on the tax simplification agenda. This is an area in which we can gain a competitive advantage. And with the risks facing our FDI model as outlined in the budgetary documentation, it is critical to the future of our economy that we all work together to make the tax code simple, clear and easy to comply with. As a small open economy, there is not much we can control in international market developments, but we can change our tax system and we should do so without delay,” concluded the Institute President.