Capital Gains Tax Reform: Industry Leaders Push for Lower Rates
Davy and PwC Ireland have formally requested that the Government implement significant cuts to the Republic’s 33 per cent capital gains tax (CGT) rate in the 2027 Budget. Both firms argue that reducing the tax burden is essential to stimulate entrepreneurship, boost domestic investment, and align Ireland more closely with international tax standards.
Why Do Analysts Want to Cut CGT?
The primary argument for lowering the CGT rate is to foster an environment where business owners feel supported in scaling their operations. Kevin Doherty, head of the business owners segment at Davy, stated that consultations with Irish entrepreneurs revealed a widespread sentiment that current tax levels stifle potential growth.
Davy is advocating for an immediate reduction to 25 per cent. In contrast, PwC Ireland has proposed a more gradual approach, recommending a phased reduction to 20 per cent over the next three to five years. According to Paraic Burke, head of tax at PwC, this shift is a “critical opportunity” to maintain Ireland’s competitive edge as global economic conditions evolve.
How Ireland’s CGT Rate Compares
Ireland’s current 33 per cent CGT rate is viewed by industry consultants as an outlier. Davy suggests that hitting the 25 per cent mark would place the Republic in the “mid-table” of eurozone nations.
While Davy and PwC differ on the final target rate—25 per cent versus 20 per cent—both agree that the current structure hinders reinvestment. Taoiseach Micheál Martin acknowledged these concerns in February, noting that the Government is actively scoping changes because there is “evidence we’re losing some investments or some capital when people sell their businesses.”
What Changes Are Proposed for R&D Credits?
Beyond CGT, PwC Ireland has flagged that the State’s research and development (R&D) tax credit system is becoming misaligned with modern business practices. While Ireland has a strong history of attracting R&D, the consultancy notes that current credits do not reflect the reality of outsourced innovation.
PwC recommends increasing the third-party outsourcing cap for R&D credits from 15 per cent to 30 per cent. This change would allow companies to better utilize niche expertise, which is increasingly common in modern, specialized R&D projects.
Frequently Asked Questions
What is the current capital gains tax rate in Ireland?
The standard rate is currently 33 per cent.
What is Entrepreneur Relief?
It is a scheme that allows business owners to pay a reduced 10 per cent CGT rate on the sale of business assets or shares, currently capped at a lifetime limit of €1.5 million.
Why do firms want to change R&D tax credits?
PwC argues that the existing 15 per cent cap on outsourcing is too low, as many firms now rely on external experts to conduct specialized research and development.
Is the Government considering these tax changes?
Yes, Taoiseach Micheál Martin has stated that the Government is examining the 33 per cent rate, citing concerns about losing capital when business owners exit their ventures.