The recently released Action Plan on Competitiveness and Productivity highlights 26 priorities to enhance Ireland’s attractiveness for foreign direct investment, increasing the State’s capacity to deliver infrastructure, and growing sustainable Irish businesses.
The plan outlines a broad vision to achieve long-term competitiveness, which is to be welcomed.
However, the implementation steps remain aspirational. It is imperative now that Government back up the plan with real action to provide the economy with the competitiveness boost it needs.
The Government needs to accelerate the pace of change, moving away from the theoretical into policy implementation and delivery.
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Ireland’s challenges when competing in new or changing markets are not dissimilar from those faced across the EU. The 2024 Mario Draghi report on EU competitiveness set out a blueprint on how to address structural challenges facing EU economies, including the four areas of innovation and competitive decarbonisation, using enablers such as finance and simplification.
Draghi’s findings have been widely embraced and are already playing a role in guiding the EU’s strategic agenda for the coming years. But one year on from the release of the report, only 11 per cent of Draghi’s 383 recommendations have been fully delivered, according to a study by think tank EPIC.
A delaying factor in the Draghi report is the lack of detailed incentives for citizens and businesses to play a role in the transformation. This specifically extends to a lack of new EU tax incentives to change behaviours one year on from Draghi, particularly around funding investments in strategic industries or decarbonisation.
Upon reading the Irish action plan, greater urgency is needed around introducing an innovation credit, delivering a climate-focused competitive economy, expanding the activities that qualify for the research and development tax credit, and incentivising investment into start-up and scaling companies. Tax policy can be an effective lever to kickstart desired behaviours.
More to do on innovation
The plan outlines the vision for strengthening Ireland’s innovation ecosystem. It identifies research, development and innovation (RD&I) as a cornerstone of economic progress and international competitiveness.
Draghi argues that Europe must close the innovation gap with the US and China. We need to attract emerging sectors such as Artificial Intelligence (AI) using targeted incentives and policy stability. The plan notes that the R&D tax credit should be more effective in supporting smaller firms and extending the activities that would qualify for the credit. Budget 2026 delivered some welcome R&D improvements, which will help to position Ireland as a more innovative economy, but there is more to do.
Not enough commitment on decarbonisation
While the stated goals of placing decarbonisation and climate action at the heart of Ireland’s economic and competitiveness agenda are commendable, the implementation pathways outlined in the plan remain underdeveloped – particularly around regulatory simplification. While there is a commitment to utilise the Environmental Aid Scheme to provide grants to high-impact decarbonisation projects, there is little detail and still too much talk of reviews and examinations.
Targeted, upfront tax incentives and regulatory clarity are essential to mobilise the scale of investment needed for a just and competitive transition to net zero. Unfortunately, Budget 2026 did not include adequate resources to deliver our climate targets and actions set out in the plan.
More action on efficient access to finance needed
The plan recognises that efficient access to finance is critical for innovation, business growth and economic resilience. We face persistent challenges in the Irish financial landscape, including a fragmented capital market and a significant funding gap for scaling SMEs and start-ups.
An inefficient Irish and EU capital market leads to the sale of successful start-ups. Taking that into account, only three actions are suggested in the plan, with the first priority being to establish Start-Up Ireland as a central co-ordinating body to enhance collaboration, but not occurring until Q4 2026.
More and faster action is needed to ensure that Ireland remains attractive in an increasingly competitive international landscape.
Urgent action to reduce red tape
A recommendation of the Draghi report is to reduce the administrative burden for SMEs by at least 35 per cent, while a priority step within the Irish plan is to introduce a “red tape challenge” across Government to reduce regulation for SMEs.
However, it is disappointing that the reduction in the Irish regulatory burden is only planned to occur by 2029. Ireland should immediately implement a tax simplification roadmap, to provide a clear, multi-year plan for reducing complexity in the tax code and compliance processes. This should then be replicated for non-tax regulatory simplification.
Ireland is poised to embark on a significant opportunity in the coming months, assuming the presidency of the Council of the European Union from July 1st, 2026. During this six-month period, Ireland will set the tax agenda for the EU Council.
But how can we effect change in the EU when we are slow to control our own tax controllables?
Last week’s budget took concrete steps in using tax policy as a lever to tackle Ireland’s housing crisis, specifically the apartment viability gap, which in and of itself is a competitiveness blocker.
We need to see this joined-up thinking replicated to make inroads on the themes of innovation, decarbonisation, finance and simplification, in order to truly progress this action plan.
Paraic Burke is head of tax at PwC Ireland
