As the Government prepares to unveil Budget 2026, professional services firm PwC has called for an increase in Ireland’s Research and Development (R&D) tax credit and a broader definition of qualifying activities to strengthen the country’s competitiveness.
PwC’s Head of Tax, Paraic Burke, said the R&D tax credit should be raised from the current 30% to 35% to attract greater investment and innovation. “Most people are looking for an increase to 35%,” he said, adding that the Government could also consider introducing a new “innovation credit” for areas such as digital and cloud computing to support a wider range of industries.
Finance Minister Paschal Donohoe and Public Expenditure Minister Jack Chambers are due to announce the Budget tomorrow afternoon, with a focus on infrastructure, jobs, and housing. However, questions remain over whether the upcoming measures will be sufficient to improve Ireland’s overall competitiveness.
Last month, the Government launched its Action Plan on Competitiveness, promising to reduce the regulatory burden on businesses. Burke, however, said the plan was “very light on real actions” and expressed hope that more concrete steps would follow. “It’ll be interesting to see three or four weeks later, when they have all the information, will they actually make actions?” he remarked.
Infrastructure investment is expected to be a key pillar of the Budget, as Ireland continues to lag behind its European peers. Current infrastructure levels are estimated to be 25% below the average for high-income European countries, with particular shortfalls in housing, healthcare, transport, and electricity networks.
Among the anticipated Budget measures is a proposed VAT reduction for new-build apartments, aimed at reviving stalled construction projects. Burke welcomed the initiative but said it must be part of a wider package of reforms to attract investment. “They’ll change the VAT rate, but what else will they do? That’s the key thing to me,” he said.
He suggested that while the Government might introduce one or two property-related measures, four or five substantial changes were needed to make a meaningful impact.
Burke also urged the Government to simplify the tax system for private businesses, particularly smaller firms. “We talked about the R&D credit — 25% of large companies claim that, but only 3% of small companies because it’s too expensive to claim,” he explained. “They need to simplify things for private business. I’d love to see that in the Budget.”
With Budget 2026 expected to focus heavily on public investment and housing, PwC’s recommendations highlight the growing concern that Ireland must do more to maintain its competitive edge in innovation and enterprise.
