R&D tax credit increase has boosted innovation - IRDG

The Industry Research & Development Group (IRDG) and KPMG reported that last year’s Budget 2026 increase in the R&D tax credit—from 30% to 35%—has significantly boosted investment in innovation. A survey of companies engaged in R&D found that the majority used the additional funds to expand existing projects and launch new initiatives, with nearly 40% hiring extra staff as a direct result. Over 70% of firms surveyed increased their R&D spending in the past three years, and 77% plan to invest more in the coming years. The report highlights the credit’s role in retaining high-tech manufacturing, with over 50% of companies stating their work would relocate without it, and up to 75% eventually moving. Dermot Casey, IRDG CEO, emphasized that the tax credit is critical for Ireland’s competitiveness, anchoring businesses amid global competition for investment. The survey also revealed that over half of multinational corporations said less than 10% of their R&D would occur in Ireland without the credit. However, Casey noted that 1,500 of the 1,800 claimants are Irish SMEs, demonstrating broad benefits beyond multinational firms. He stressed that R&D activities—such as lab work, design, and product development—are unlikely to be replaced by AI in the short term, ensuring sustained job growth. While the current R&D tax credit focuses on scientific uncertainty, IRDG has called for an Innovation Tax Credit to support design and digitization projects, areas where Ireland lags in the EU. Casey argued that expanding the credit’s scope would further strengthen Ireland’s competitiveness, addressing gaps in design and technology-driven innovation. The report underscores the tax credit’s role in fostering long-term economic growth and job stability.