As Ireland prepares for Budget 2027, due to be announced on October 6th, the economic backdrop is more challenging than many expected 12 months ago. Conflict in the Middle East, the war in Ukraine and continued uncertainty in international trade are testing an economy that remains highly exposed to global developments.
Growth forecasts have softened, inflation has re-emerged and energy prices are again a significant concern. Annual inflation reached 3.3 per cent in June, while energy prices were 10 per cent higher than a year earlier. These pressures affect household finances, business investment decisions and the public finances alike.
In light of these pressures, Budget 2027 should not be judged by the number of measures it contains, but by whether it responds effectively to Ireland’s economic challenges and strengthens the foundations of sustainable growth. With tax revenues to the end of August at €66.3 billion, up more than 6 per cent on last year, the key question is how Ireland uses its strong public finances to address immediate pressures while investing in productivity, economic strength and the ability to withstand future shocks.
The Summer Economic Statement provides for an €8.5 billion package, comprising €1.5 billion in tax measures and €7 billion in additional expenditure. While this represents a significant intervention, the available fiscal space is more limited than the headline figure suggests. Choices will need to be made, with priority given to measures that expand Ireland’s productive potential.
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Ireland’s labour market remains resilient, with approximately 2.79 million people employed in the first quarter of 2026. However, employment growth has slowed, and the employment rate has eased from 74.7 per cent to 73.3 per cent. The challenge now is not simply creating jobs, but increasing participation, improving productivity and ensuring work continues to pay.
Budget 2027 should increase the main tax credits and standard-rate income tax band in line with wage growth to limit fiscal drag and protect workers’ purchasing power. Combined with reform of PRSI thresholds, these measures would ease the burden on workers and employers, strengthen incentives to participate in the labour market and support productivity.
Reform of share-based remuneration schemes and enhancements to the Special Assignee Relief Programme would also improve Ireland’s attractiveness for highly skilled workers and support investment decisions by internationally mobile businesses.
Ireland’s appeal as a business location is often discussed in terms of tax rates. In reality, businesses increasingly assess jurisdictions based on certainty, administrative efficiency and ease of doing business.
Successive budgets have added layers of tax legislation, filing obligations and compliance requirements. While each may have had a valid policy objective, the cumulative effect is increased complexity and cost for taxpayers.
Simplification would reduce compliance costs, improve certainty for businesses and enhance the overall efficiency of the tax system. Clarity and ease of doing business and administration are critical factors in attracting FDI.
‘The Government’s Housing Infrastructure Investment Fund is a welcome step, but tax policy should also support additional supply’
— Brian Brennan, tax partner at KPMG in Ireland and president of the Irish Tax Institute
Budget 2027 should mark the beginning of a comprehensive programme of tax simplification. Reforming the taxation of interest and foreign branch profits, streamlining corporation tax and VAT compliance obligations, and eliminating reporting requirements that duplicate information already held by the State would make Ireland a more efficient and attractive place to do business.
This work has become even more important as international tax reforms continue to reshape the global landscape. With the OECD Pillar Two framework and related reforms changing how multinational groups evaluate investment locations, Ireland will increasingly compete on certainty, skills, infrastructure, administrative efficiency and the quality of its overall business environment.
Housing and energy are often viewed through a social policy lens, but they are now fundamental economic issues.
Housing shortages affect recruitment, labour mobility, business expansion and the ability of individuals to access employment opportunities. Housing has become one of the most significant constraints on Ireland’s economic growth potential.
The Government’s Housing Infrastructure Investment Fund is a welcome step, but tax policy should also support additional supply. Measures that encourage office-to-residential conversion, improve the taxation of rental investment and facilitate employer-supported accommodation could complement direct public investment and help accelerate delivery.
Energy resilience deserves similar attention. Temporary measures such as excise reductions and carbon tax deferrals could provide short-term relief, but they do little to address Ireland’s underlying exposure to energy price shocks.
Budget 2027 should therefore focus on measures that support investment in energy security, energy efficiency and the green transition. Reducing exposure to imported energy would lower business costs and leave the economy better equipped to absorb future price shocks.
Ireland’s success in attracting foreign direct investment has transformed the economy and remains one of the country’s greatest strengths. Corporation tax receipts reached €32.9 billion in 2025, with foreign-owned multinational groups accounting for the overwhelming majority of those revenues.
Maintaining Ireland’s attractiveness as a location for international investment must therefore remain a priority. However, a more balanced economy also requires a broader domestic enterprise base.
A stronger cohort of Irish-headquartered businesses would diversify sources of growth, employment, exports and tax revenue, while reducing concentration risks within the economy. Budget 2027 should help more Irish businesses invest, scale and compete internationally.
‘A successful budget will not seek to do everything; it will focus on the measures that can make the greatest difference to Ireland’s future prosperity’
— Brian Brennan, tax partner at KPMG in Ireland and president of the Irish Tax Institute
Priorities should include reform of the capital gains tax regime, enhancement of Entrepreneur Relief, improvements to the Key Employee Engagement Programme, extension of start-up reliefs and simplification of the Employment Investment Incentive Scheme. Reform of succession rules would also support the long-term sustainability of family-owned businesses and farms.
Budget 2027 comes at a time when Ireland holds the presidency of the Council of the European Union.
The presidency provides an opportunity for Ireland to advance a European competitiveness agenda focused on simplification, investment, productivity and reducing administrative burdens for businesses. These priorities align closely with wider EU efforts to improve economic performance, enhance energy security and deepen the single market.
Ireland has long been regarded as a pragmatic and credible voice on economic policy. Progress at European level on competitiveness and simplification would directly benefit Irish businesses and strengthen Ireland’s position as a location for investment.
Budget 2027 will require a difficult balance between supporting households facing higher costs and investing in Ireland’s future economic potential. The Government will be tested on whether it can look beyond short-term pressures and use the public finances to reward work, improve the business environment and unlock investment in housing, energy and Irish enterprise. A successful budget will not seek to do everything; it will focus on the measures that can make the greatest difference to Ireland’s future prosperity.
KPMG understands the pressures faced by businesses. If you need advice and support on any of the tax issues raised in this article, please click here for more information
