Balancing FDI and SMEs: Baker Tilly’s Brendan Murphy on what Budget 2026 should deliver for business

When Brendan Murphy sat down after Budget 2025, his verdict was blunt. “It was a case of kicking the can down the road,” the tax partner at the accountancy firm Baker Tilly said at the time. 

Schemes such as EIIS and KEEP, long criticised by the business and investment community as being costly and complex, were left untouched. Capital gains tax reliefs for entrepreneurs remained narrow. 

It was one of the largest budgets in the State’s history, but Murphy felt it had done little for entrepreneurs or medium-sized businesses.

“If you are talking about a giveaway budget and trying to give something back and look after businesses, why not encourage our country’s entrepreneurs more?” he said at the time.

A year later, sitting down to discuss the priorities for Budget 2026, Murphy has tempered his expectations. “Hope is one thing,” he says. “Expectations are another.”

Based on the public comments and commitments, Budget 2026 will be about deploying additional funds into capital spending. There will be little on the table for the tax package – around €1.5 billion, which Murphy acknowledges is modest and less than in previous years.

“It’s going to be all about spend and capital spend, and that’s where the surplus will go. We understand €2 billion has been earmarked for capital expenditure,” Murphy says.

For Murphy, this is both understandable and somewhat concerning. 

On one hand, he accepts the case for capital investment. “The infrastructure is needed – that’s going to certainly help keep some of the companies that are here that we want to keep expanding,” he says. 

In a world of trade wars and tariffs, Murphy argues that if companies cannot access energy, data centre capacity, or reliable water supplies, future expansion is at risk.

On the other side, he believes that the Government should do more for domestic businesses, entrepreneurs and investors if it is to grow the indigenous economy and reduce the country’s growing reliance on multinational corporate tax revenue. 

“It’s great that we’re encouraging infrastructure, and we 100 per cent agree with that. We all acknowledge that we can’t lose our strong  FDI base. There’s nobody denying that. But at the same time, you’d love to see  more encouragement for entrepreneurship.”

Murphy’s practice straddles two worlds: the Baker Tilly network multinational clients, and domestically, what he calls the “M in SME” — medium-sized companies valued anywhere from €5 million to €30 million. It provides him with a rounded view of the issues facing two very different sides of the economy.

On the multinational side, he says the conversation has shifted away from headline tax.

“There’s not a lot we can do anymore from a corporate tax perspective that’s not driven by the OECD or EU,” he says. “We’ve brought in the global minimum corporation tax now and  we can’t really do a lot independently on  corporate tax reform.”

“So you probably need to look outside of tax,” he adds, and when multinationals “have good roots here, they have their employees here, how do we double down on that and make sure that they do stay?”

The real risk, he stresses, is not that firms will “up roots and leave” — something often made difficult by exit taxes and capital investment. “It’s the slowdown on the future investment,” Murphy argues. “They’ll weigh up tariffs, they’ll weigh up tax, but they’ll weigh up how easy it is to actually expand their operations in the country as well.”

That is why Murphy sees capital spending as crucial — but not sufficient on its own. Without reform of domestic business supports, he believes the State is letting entrepreneurs down.

If Budget 2025 was supposed to be a giveaway, Murphy believes Irish entrepreneurs never saw the benefit. In fact, he argues, it compounded frustrations by promising change but delivering little more than reviews.

“There were four or five reviews going on after the budget last year,” he recalls. “And it feels like you never get the full outcome of these reviews.”

Last October, ministers announced reviews of share-based remuneration, the R&D tax credit, interest deductibility, and the taxation of the funds sector. 

A year later, few have reached any real conclusion. “Things have been kicked into review. There’s another R&D consultation going on right now in the Department of Finance. So we can assume  that’s going to be acknowledged i in the budget that the R&D credit is under current consultation,” Murphy says.

The same problem, he argues, applies to schemes specifically designed for entrepreneurs. Murphy is particularly critical of EIIS, once seen as the flagship incentive for individuals investing in Irish businesses. “The EIIS is one particular scheme that just feels very legislatively onerous at this stage. It has suffered from a lot of amendments being made to the same piece of legislation over many years. It sometimes feels like the amendments are papering over cracks in it and have led to it being unnecessarily restrictive. It fails to deliver on the principal goal of encouraging genuine private investment,” he says..

“It’s a great concept in principle, and it is the one significant income tax relief for individuals, but I feel investors face overly complex rules, unpredictable Revenue interpretation, and often delayed relief. At a time when Irish SME’s need fresh equity to scale and compete, the legislation should be streamlined and simplified to make it attractive and easy to use.”

If there is one issue Murphy wants to see addressed, it is capital gains tax (CGT). He has long argued that Ireland’s regime, and the headline rate of 33 per cent, fails to reward genuine risk-taking.

“It would be great to see a way in which we can actually reward job creation from a CGT perspective,” he says. “I know you have to be mindful of somebody setting up a corporate with no employees and trying to claim entrepreneur and/or retirement relief, but at the same time, if I am an entrepreneur starting a business and creating multiple jobs, perhaps in a rural area, then that has to be rewarded.

“Somebody paying 33 per cent tax on a sale of that business, if they fall out of those specific reliefs,  seems very harsh, considering what you have given back to the country. Payroll creation, payroll taxes paid and possibly lots of Vat paid too should be rewarded.  One idea would be to perhaps link a CGT relief to either employee numbers or payroll taxes paid. The relief could allow some form of a stepped reduction in your CGT based on certain thresholds achieved over the life of the business.”

Murphy had proposed this idea of linking entrepreneur relief to payroll taxes generated by the business last year — a way of tying tax benefits directly to job creation. Again, nothing was done. “I don’t think it would actually be that hard to factor in something like that to the current relief,” he insists.

The hospitality sector has lobbied hard for a return to a lower Vat rate. At present, the suggestion in government circles is that restaurants will be offered a lower rate, but hotels not.

Murphy is sceptical, questioning whether it is the right battle.

“At the end of the day, there is no doubt our hospitality sector needs support right now, but you do stop and wonder if the VAT rate change alone is going to be enough to turn the tide,” he says.

“I don’t think it’s the silver bullet, to be honest. We’re seeing bars and restaurants all over the country closing on a weekly basis now. It has been identified that 306 establishments offering food services have closed in the first seven months of this year alone. And is a blanket four per cent Vat cut to all establishments going to make the required  difference?”

In addition, he says the proposal would eat a large chunk of the tax package. Instead, he says it would be worth looking at spending measures in the Budget and follow through on the Programme for Government’s promise of bringing forward measures to support SMEs in the retail and hospitality sector. 

“Minimum wage increases, sick pay changes, pension auto enrolment, energy costs and increasing costs of food raw materials are causing these businesses’ costs to spiral, and they need some financial support, perhaps via a wage supplement scheme for hospitality staff or energy credits for these businesses,” he says.

Despite the policy frustrations, Murphy insists business sentiment remains more positive than might be expected amid the growing international uncertainty and trade spats.

“When you look at the Exchequer receipts, and especially the corporate tax receipts, they are still going upwards, even with all that uncertainty, and with a wait-and-see approach adopted by a lot of those multinationals,” he says.

For Murphy, the message to ministers is simple. “The main ones for us is kind of two-fold,” he says. “On the one hand, it’s for our domestic business and entrepreneurs behind them. Look after them. Think about CGT.

“On the FDI, it’s that infrastructure piece, because there’s nothing we can do really on the tariff front now. The only real strong tax point we can offer is enhancements to the R&D credit, but we know that’s under another review again.

“We could certainly look to improve the R&D credit. Likewise, KEEP: share awards are frequently used by multinational employers, and we should look at making some type of easier share scheme to reward employees at CGT rates rather than income tax rates. But is that going to happen? To repeat, hope is one thing, but expectations are another.”

The Currency’s coverage of Budget 2026 is supported by Baker Tilly Ireland.