Budget 2027: Turning Tax Reform into Competitive Advantage

EY tax partners Petrina Smyth and Sinead Colreavy were recently interviewed for Finance Dublin’s Tax Monitor edition, sharing their perspectives on Budget 2027, tax policy and the opportunities for Ireland’s financial services sector. We have reproduced the key discussion below.

1. Retail Investment

The Department of Finance is due to publish a roadmap on retail investment in the coming days. Can you please comment on the tax elements of the roadmap.

The proposed Investment Account is a welcome development and should help move retail savings from deposits into long-term investment.

However, it does not address the structural complexity of Ireland’s fund taxation regime, an issue identified by the Commission on Taxation and Welfare and revisited in Funds 2030.
The real test of the Roadmap is not whether the Investment Account is introduced. It is whether it ultimately delivers reform of deemed disposal and creates a simpler, more competitive retail investment framework.
It opens the door to wider reform of investment tax rates, deemed disposal and administration. The direction is welcome, but ambition alone will not change investor behaviour. The real test is whether Government now moves at pace and converts the roadmap into clear, workable measures.

2. Tokenisation

The recent launch of tokenised share classes of Irish-domiciled Money Market Funds demonstrates the potential for increasing use of tokenisation in the funds and the broader financial services industry. This comes as the Government has already committed to legislative changes to support tokenisation of investment funds in particular. In your view, what are the potential tax considerations, if any, of updating legislation to support tokenisation of funds, and indeed the use of tokenisation in other sectors?

Sinead Colreavy answered: Tokenised share classes for Irish-domiciled funds mark a key milestone in the shift of tokenisation from concept to commercial reality. From a tax perspective, investors should face the same outcomes regardless of whether ownership is recorded through a traditional register or distributed ledger technology.

Legislation will need to provide certainty regarding the tax classification of tokenised interests, ensuring they are treated consistently with equivalent traditional securities. Policymakers must also consider how withholding taxes, reporting obligations and information exchange requirements operate in an on-chain environment. Smart-contract functionality could ultimately support automated tax reporting, tax withholding and compliance processes, reducing administration for investors, fund managers and Revenue alike.

While tax measures are relevant, if legislative reform is combined with regulatory certainty and modernised tax administration Ireland could position itself as a leader in digitally enabled investment products.

3. Taxation of Interest

In their joint response, made public in August, to the Department of Finance’s ‘Feedback Statement for Phase One of Reform of Ireland’s Taxation Regime for Interest’, the Irish-headquartered MNEs Johnson Controls, Eaton Corporation and Medtronic wrote ‘the Feedback Statement is very disappointing from a business community perspective. It is unclear what tangible benefits the proposed measures would bring to taxpayers, aside from potentially addressing some very specific or limited circumstances.’ How have plans to reform Ireland’s taxation regime for interest evolved in 2026 and what are the key changes that would result in ‘tangible benefits’ for Irish corporate taxpayers?

Petrina Smyth answered: Since the publication of the Phase One Feedback Statement, the reform agenda has evolved from a conceptual review of Ireland’s interest taxation regime into a more focused discussion around simplification, certainty and competitiveness. The most significant proposals include a new principle-based “profit motive” test for interest deductibility, simplification of Section 247 interest relief, greater alignment of trading and passive financing activities and rationalisation of interactions with transfer pricing and interest limitation rules. The “tangible benefits” sought by Irish corporate taxpayers are not additional reliefs but rather easier access to existing deductions, reduced compliance costs, greater certainty of tax outcomes and a more competitive financing regime for Irish-headquartered groups.

4. 1907 Limited Partnership

The Department of Enterprise, Tourism and Employment have committed to updating the 1907 Limited Partnership and have recently conducted a public consultation on reform of the framework. Are there tax aspects that could also be considered as part of the reforms to enhance the 1907 LP?

Petrina Smyth answered: The proposed reform of the 1907 Limited Partnership regime is better viewed as a competitiveness and governance initiative. The measures under consideration, including increasing the partner limit, introducing a statutory whitelist of permitted investor activities and providing greater flexibility around capital contributions, are designed to modernise an outdated legal framework and bring Ireland more into line with leading private capital jurisdictions.

Importantly, the proposals do not alter the underlying tax transparency of 1907 limited partnerships. Instead, they seek to enhance legal certainty, improve operational flexibility and remove structural constraints that can make Ireland less attractive for private equity, private credit.

The tangible benefits sought by Irish corporate taxpayers are not additional reliefs but rather easier access to existing deductions, reduced compliance costs, greater certainty of tax outcomes and a more competitive financing regime.

Petrina Smyth, Partner, Tax

5. Ireland for Finance

The Department of Finance launched the latest Ireland for Finance strategy on 25th August. The strategy outlines the planned (and in some cases, ongoing) tax reforms in the areas of R&D, taxation on interest (see Question 3) and Section 110. In your view, what other aspects of Ireland’s tax regime, if reformed, could support the goals outlined in the IFF strategy – ‘to incentivise entrepreneurship, fostering innovation, and enhancing the competitiveness of our tax framework for inward investment’?

Sinead Colreavy answered: The renewed Ireland for Finance strategy rightly prioritises R&D incentives, interest reform and the ongoing review of the Section 110 regime. While these initiatives are important, further tax reforms could strengthen Ireland’s competitiveness and support innovation, entrepreneurship and inward investment.

Retail investment reform should remain high on the agenda. Increased participation in capital markets would broaden access to long-term funding for Irish businesses and entrepreneurs. Ireland should also continue to review the tax framework for private assets, investment funds and tokenised financial products to ensure it keeps pace with technological change.

Maintaining the competitiveness of established international financial services regimes, including Section 110, is equally important. Tax certainty, treaty access and a robust legal framework remain key advantages. As global competition intensifies, reforms that enhance simplicity, certainty and ease of doing business are likely to deliver the greatest long-term benefits.

6. Tax Management

The next 12 to 18 months will be a challenging period for corporate tax managers. Rapid legislative changes coupled with increasing expectations around efficiency, governance and strategic insight, is placing unprecedented demands on tax functions.

A key challenge will be navigating an increasingly complex international tax environment. Pillar Two implementation, evolving interest limitation rules, expanding reporting obligations and heightened regulatory scrutiny all require significant investment of time and resources. At the same time, stakeholders are demanding greater transparency, stronger governance and more effective tax risk management.

Technology will be a critical differentiator. Tax departments are under pressure to automate routine compliance activities and make greater use of data analytics and artificial intelligence. Those who successfully embrace technology will be better positioned to shift resources towards higher-value advisory work.

To respond effectively, organisations must strengthen governance frameworks, enhance data integrity and accelerate investment in digital capabilities. Success will depend on building teams that combine deep technical expertise with technological fluency and commercial judgement.

Conclusion

Ireland cannot compete on tax alone, nor should it. Its position as a leading international financial services centre has been built on certainty, expertise and execution. While the policy direction is clear, competitiveness will ultimately depend on how quickly reforms are delivered.

Encouragingly, Government increasingly recognises the link between savings, investment, retail participation, private assets and the funds industry. Initiatives including Funds Sector 2030, the retail investment roadmap, partnership reform, the Section 110 review and Ireland for Finance provide the foundations of a coherent strategy. The challenge now is execution.

Competing jurisdictions continue to evolve. Ireland’s strengths in funds, securitisation, aircraft leasing and private capital remain significant, but standing still is not an option. Opportunities in tokenisation, digital assets, private markets and retail investment reform can differentiate Ireland, provided tax and regulatory changes are implemented in a coordinated and timely manner.

The industry no longer needs evidence that Government is listening. It needs evidence that Government can deliver.

This interview originally appeared in Finance Dublin’s Tax Monitor edition and is reproduced here with permission.