Sharp fall in corporation tax revenues a clear warning that Ireland cannot rest on its laurels
Budget 2024 has introduced many welcome measures, but issues like housing must be addressed to allow for an increased labour force
From a global standpoint, Budget 2024 holds great significance for international businesses operating in our nation. Within its provisions lie numerous measures designed to bolster Ireland’s allure as a hub for international business activities. Ibec acknowledges the government’s efforts in taking crucial strides to retain international businesses.
This budget underscores the economic significance of having international companies flourish within our borders, marking a promising initial stride towards a more prosperous future.
From our Brussels offices, where daily interactions with various governments, EU agencies and global corporations take place, it’s evident that Ireland’s economy is in remarkably strong shape compared to those of many neighbouring nations.
When we present Ireland as a prime business destination, we can confidently point to a sturdy macroeconomic foundation, robust institutions and a welcoming business environment that has drawn some of the world’s most innovative and pioneering companies.
These international partnerships and relationships are key contributors to Ireland’s resilient and thriving economy today. Our skilled workforce and the nation’s business-friendly attitude have consistently proven successful in the fierce competition for international investments against other nations.
We must not underestimate the formidable challenges that persist on the horizon. Presently, we navigate a multifaceted and perpetually evolving global landscape, characterised by substantial geopolitical upheaval resulting from ongoing conflicts, the ebbing tide of globalisation, democratic erosion, persistent inflation, supply chain disruptions, mounting climate change pressures, oscillating energy markets, Brexit’s far-reaching consequences and the enduring spectre of the Covid-19 pandemic.
As we contemplate the path ahead, which may entail a moderation in economic growth, it is imperative to protect the hard-earned gains of the Irish people while forging an ambitious trajectory forward. Much of this protection can be reinforced through the continued increase in the number of companies selecting Ireland as their business base.
Investing in our future is an integral part of the safeguarding process. Ibec welcomes the establishment of the National Infrastructure, Climate and Nature Fund, as it not only enables immediate capacity building but also ensures sustained investment over the next decade.
Ultimately, the success of this endeavour hinges on the effectiveness of its implementation. Another positive development is the increase in the research and development tax credit to 30 per cent, which will bolster Ireland’s credentials in hosting high-value research, development and innovation.
Large multinational enterprises (MNEs) will continue to benefit from this credit even as we transition to a new global minimum tax, while SMEs will reap additional advantages.
For indigenous businesses, the SME support package offers much-needed relief, especially for those grappling with substantial government-imposed increases in labour costs. However, we believe more work needs to be done in this area to make this support swiftly operational and accessible.
It also needs to be a starting point for broader discussions on transitioning to a living wage, pension auto-enrolment and other significant labour market changes in the coming years.
In these times, businesses, much like households, are grappling with heightened cost concerns. Supporting businesses during these challenging times requires a delicate balancing act.
On one hand, organisations like Ibec and others working with the government must facilitate and maximise the potential of businesses. On the other hand, fiscal responsibility is vital, avoiding overcommitting resources based on potentially volatile corporate tax revenues.
Recent events have emphasised the unpredictable nature of corporate tax returns, exemplified by a significant €1 billion drop in August.
It remains imperative for Ireland to maintain its appeal to international investors, especially in light of the new commitments set to impact corporate tax rates from January 1.
It is crucial that the government removes existing barriers to attract new business
These commitments could increase the tax, providing more for the exchequer by increasing the burden on certain international companies based here. We must ensure that we continue to offer an operating environment that is fit for purpose.
Challenges related to capacity constraints continue to influence business decisions and pose risks to Ireland’s international competitiveness, particularly in areas like housing. Addressing these challenges remains a top priority for all political parties.
It is crucial that the government removes existing barriers to attract new business and create the right conditions for increased labour force participation. This will ensure that Ireland remains an attractive place to live and work.
Ibec Global has established itself as the leading English-speaking, globally connected business organisation in Europe. This prominent standing positions us to play a pivotal role in shaping the course of international business in Ireland.
As the foremost advocate for international business within the country, we firmly believe that Budget 2024 represents an important initial step in supporting the business community while outlining an ambitious path for future infrastructure investments.
These investments will serve as a magnet for international businesses, further enhancing Ireland’s appeal as a global business destination.
Jackie King is executive director of Ibec Global