Deloitte’s pre-budget submission urges the Government to cut Capital Gains Tax to 20%, implement a new AI & digitalisation tax credit, and introduce targeted but comprehensive incentives to increase housing supply

• Submission outlines bold strategies to maintain competitiveness, attract investment and stimulate domestic growth
• Recommendations include a decarbonisation tax credit, changes to the R&D tax credit regime and a new loan finance arrangement that would encourage individuals to lend money to SMEs  

16 May 2025. Deloitte Ireland today launches Scaling Smarter, a strategic 2026 Pre-Budget Submission. 

The Government should implement a new AI & Digitalisation tax credit and prioritise a reduction to the headline Capital Gains Tax (CGT) rate to 20% to align Ireland with EU norms and remove distortions that discourage both domestic entrepreneurship and an influx of foreign capital. It should also introduce strategic tax reliefs and incentives to increase the supply of the right type of housing in the areas that need it most.

The policy recommendations are contained in Deloitte Ireland’s pre-budget submission, which has been submitted to the Department of Finance.

1.     Domestic Direct investment

The submission warns that the country faces significant challenges and that bold strategies are required to maintain competitiveness, attract investment and to support and stimulate significant domestic growth. It says the country’s tax policy should ensure future growth by accelerating DDI. This should include a reduction to the headline CGT rate and tapered CGT relief to encourage entrepreneurs to scale their businesses in Ireland.

Deloitte says the headline CGT rate of 33% should be reduced to 20% to enhance Ireland’s enterprise environment, support small businesses, facilitate inter-generational succession and strengthen the taxation framework to improve competitiveness and business continuity. It says a reduced CGT rate would align Ireland with EU norms and remove distortions that discourage entrepreneurship.

Given CGT receipts represent only around 2% of the overall tax yield, Deloitte points out that a reduction in the headline rate would have a minimal impact on fiscal sustainability while promoting economic efficiency.

The pre-budget submission argues that a graduated CGT tapering relief is essential to support high-growth enterprises. Under this initiative, the CGT rate for entrepreneurs, who might otherwise sell their business early, would be reduced based on their period of ownership and active involvement in the business. Deloitte says the move would encourage entrepreneurs to scale their business in Ireland rather than seeking early exits or relocating abroad. It would also reward those who actively contribute to the country’s economic development rather than short-term speculative investors, and position Ireland as a premier destination for entrepreneurial activity.   

2.     Housing

The pre-budget submission warns that the ongoing housing supply crisis is weakening Ireland’s competitive edge and limiting its ability to attract key skills to the country in crucial sectors such as technology and financial services. To address this, Deloitte urges the Government to introduce both incentives and reliefs for developers to provide the necessary housing supply.

Hanberry said: 

The submission says that such measures should be targeted to specific needs and locations such as the provisions of student accommodation near universities and colleges, senior-co-living developments, urban apartments, and the remediation of brownfield sites. It also says any such initiatives must be transparent, regularly monitored and time-bound.   

3.     Decarbonisation & Digitalisation

The submission predicts that as many global markets increasingly prioritise environmental responsibility, Ireland risks falling behind in offering businesses the necessary incentives to decarbonise their operations.

It urges the Government to introduce a decarbonisation tax credit to reward companies that invest in emissions-reducing technologies and practices. It says this ‘carrot’ approach can complement the ‘stick’ of carbon pricing and accelerate voluntary action.

A similar tax credit for businesses investing in AI and digitalisation is also proposed by Deloitte. This would apply to expenditure related to the reliably safe development, implementation and use of AI and digitalisation. The submission says this new stand-alone credit should be closely aligned to the existing R&D tax credit format, but with a different science test and lower bar in terms of advancing the field of computer science.

Deloitte’s submission also calls for changes to the country’s R&D tax credit regime to permit relief for the cost of R&D work outsourced to related parties. In addition, the submission recommends removing the current limits on the cost of R&D work outsourced to third level institutions. Such a move would bring Ireland in line with other jurisdictions and enhance the country’s competitiveness.

Other key recommendations in Deloitte’s pre-budget submission include:

• A tax-efficient SME financing model: The introduction of a loan finance arrangement to encourage individuals to lend money to SMEs. Any interest income received by investors would be taxed at the standard rate of income tax (20%) instead of the marginal rate of up to 55%. Such an initiative could potentially achieve two critical policy goals – unlocking a new source of SME finance and making SME finance more attractive. Deloitte says many investors have capital sitting idle in Irish deposit accounts earning minimal returns. This policy could incentivise them to channel funds into productive investments that support the real economy.
• Targeted tax reliefs for landlords: Tax policy reforms to support new and existing landlords in delivering long-term, high-quality rental accommodation. This would include a reduced tax rate on rental income, retrofitting incentives and changes to the treatment of rental losses.
• Continuation of SARP: The Special Assignee Relief Programme (SARP) should become a fixed part of the tax code, and the Government should promptly confirm the continuation of the programme beyond its current expiration date of 31 December of this year. Shortcomings in the scheme should be addressed to ensure it is competitive with expat regimes offered in other jurisdictions. Deloitte says that despite its shortcomings, SARP has proven instrumental in fostering job creation and attracting highly skilled workers to Ireland.
• Tax policy measures to drive regional development: Adopt tax policy measures designed to drive development in regions and enhance activity. Specific recommendations include enhancing the R&D tax credit for rural innovation, establishing ‘Growth Hubs’ with employer PRSI exemptions and introducing accelerated capital allowances for commercial property investments outside Dublin. Deloitte says the need for policy intervention to drive investment into underdeveloped regions is illustrated by the current economic imbalance, where over 40% of GDP is concentrated in Dublin.