Three practical employment tax reforms

Reduce the administrative burden of Enhanced Reporting Requirements

The introduction of Enhanced Reporting Requirements (ERR) has created a significant additional compliance obligation for businesses.

Under the current rules, employers must report certain tax-free payments and benefits, including travel and subsistence expenses, remote working allowances and small benefits, to Revenue on or before the date they are provided to employees.

While the goal of greater transparency is understandable, the “on or before” requirement can create practical challenges, particularly for employers with large workforces, decentralised approval processes or high volumes of expense claims.

Introducing a single monthly, or potentially quarterly, reporting deadline could achieve the same compliance outcome while significantly reducing the time and cost involved in meeting these obligations. 

The case for a fixed reporting cycle

A revised approach would allow employers to submit a consolidated return covering all reportable benefits provided during the reporting period, similar to other filing obligations that already exist within the tax system. The benefits could include:

•  Reduced administrative demands on payroll and finance teams;
•  Fewer reporting corrections and amendments;
•  Greater flexibility in processing and approving expenses;
•  Improved operational efficiency; and
•  Continued visibility and transparency for both Revenue and employees.

Importantly, this would not reduce the level of information reported. It would simply align reporting timelines more closely with how businesses operate.

As Ireland continues to strengthen its competitiveness, reducing unnecessary compliance burdens while maintaining transparency should remain a key policy objective.

Supporting employee share participation through practical funding arrangements

Employee share incentive schemes remain an important tool for attracting, retaining and rewarding talent.

However, employees can face a practical challenge when a tax liability arises before shares are sold and before any cash proceeds are available to fund that liability.

In some cases, employers support employees by allowing the tax cost or funded share value to remain outstanding as a loan until the shares are eventually disposed of.

These arrangements typically give rise to a Benefit-in-Kind (BIK) on the preferential loan, creating an additional tax charge for employees and added payroll administration for the employer.

Encouraging wider participation in share ownership

A targeted Budget 2027 measure could remove the BIK loan rate where:

•  The loan arises directly from participation in an employee share scheme;
•  The loan relates to taxes or share value funded by the employer; and
•  Repayment is linked to the eventual disposal of the shares.

Adopting this position would recognise the unique circumstances of employee share ownership, where individuals may hold illiquid assets that cannot easily be sold to meet an initial tax liability.

Such a measure could encourage broader participation in share ownership, particularly among indigenous growth businesses and scaling companies competing internationally for talent.

Removing the USC surcharge on foreign employment income taxable in Ireland

Ireland’s international workforce continues to expand, with many individuals living in one jurisdiction while carrying out employment duties in another.

In certain circumstances, foreign employment income remains taxable in Ireland and can also be subject to the 3% USC surcharge.

The application of the surcharge to foreign employment income can sometimes lead to outcomes that are difficult to justify from a policy perspective.

A competitiveness consideration

Individuals earning employment income are actively participating in the workforce and contributing to economic activity. Applying an additional USC surcharge simply because employment duties are performed outside Ireland, and the income is not within the Irish PAYE system, can create an unintended disparity between employees carrying out Irish and foreign employment duties. Removing the 3% USC surcharge on foreign employment income that is personally subject to tax in Ireland could:

• Enhance Ireland’s attractiveness for internationally mobile talent;
• Improve fairness within the USC framework;
• Simplify tax calculations for affected individuals; and
• Bring the treatment of foreign and domestic employment income into closer alignment.

As international mobility continues to evolve, tax policy should support, rather than discourage, modern cross-border working arrangements.

A practical Budget 2027 agenda

Major tax reforms often attract the most attention. However, targeted measures that improve efficiency, encourage employee ownership and remove unintended distortions can often deliver the most immediate impact.

Moving ERR to a fixed reporting cycle, removing the BIK loan rate for employee share funding arrangements and removing the USC surcharge on foreign employment income taxable in Ireland would each represent practical reforms with tangible benefits for employers and employees.

Importantly, none of these proposals would require a fundamental redesign of Ireland’s employment tax system. They are focused, achievable measures that improve administration, support participation and strengthen competitiveness.

As Budget 2027 approaches, these are the types of pragmatic changes that could make a meaningful difference while remaining realistic from both a policy and implementation perspective.