Foundations for Growth and Competitiveness 2026

Ireland

Ireland’s living standards have improved considerably over the past decade. Driven largely by multinational enterprises, per capita income and labour productivity have surged to among the highest in the OECD, although domestic firms have remained far less productive. Robust population growth, supported by net migration inflows, plus rising participation rates among women and seniors, have pushed up employment rates. Private domestic investment has been volatile in the multinational sector and subdued overall lately.

Improving access to childcare and reducing tax disincentives for second earners are key to further increasing participation rates and lowering the high share of women on part-time contracts. A more diversified revenue structure would increase resilience to shocks while providing more stable funding for productivity-enhancing long-term investments. Ensuring that physical and digital infrastructure networks meet the quality standards required by an innovation-oriented economy is paramount to preserving Ireland’s attractiveness to foreign investors.

Economic performance

Gaps to the average of the upper half of the OECD countries

Source: Panel A: OECD, Economic Outlook database; Panel B: OECD, Labour Force Statistics database; Panel C: OECD, Economic Outlook and Productivity databases; Panel D: OECD, Economic Outlook and Annual National accounts, GFCF by assets databases.

Selected policy gaps

Source: OECD calculations based on the Foundations for Growth and Competitiveness database.

Labour market: make childcare more affordable to support full-time employment for women

The employment rate of women aged 15-64 has risen to around 70%, but close to one third of those employed are on part-time contracts. Enrolment in childcare, which is largely privately run, is low compared to other OECD countries, particularly for low-income households. This is partly due to elevated childcare costs, which have accelerated on the backdrop of capacity and skills shortages, despite generous public subsidies and enhanced funding. The tax and benefit system also increases net childcare costs, creating disincentives for women to work or work more hours.

Recommendations

✓ Continue measures to expand childcare capacity.

✓ Make public financial support for childcare more means-tested.

✓ Smooth disincentives for second earner employment arising from the combined effect of childcare costs, taxation and withdrawal of benefits.

Digitalisation: Expand access to fast broadband and boost competition in telecommunications

Despite the uneven territorial distribution of its population, Ireland has been making considerable progress in rolling out the national ultra-fast broadband network. Even so, there is room to improve digital service uptake, as the shares of households and businesses subscribing to fast and ultra-fast fixed broadband connections are somewhat lower than the OECD average. This may limit potential productivity gains, particularly in more peripheral areas. According to OECD’s Product Market Regulations indicators, regulation in fixed and mobile e-communications is comparatively slightly more stringent.

Recommendations

✓ Complete the rollout of the high-speed broadband network by 2026, in line with the National Broadband Plan.

✓ Undertake an assessment of barriers to competition in digital markets to support innovation, fair access to market and consumer choice.

✓ Set clearer rules requiring fixed and mobile operators to grant access to their infrastructure for new service providers through the adoption of infrastructure-sharing agreements to limit anti-competitive behaviour.

Innovation: Foster R&D and innovation diffusion among domestic firms

Business R&D is largely driven by foreign-owned multinationals, while direct public funding accounts for a small share of its total. This reflects the scope to boost cooperation between businesses, universities, and public research institutions and venture capital funding, to facilitate broader innovation diffusion and productivity gains. Tax support to R&D investment is substantial, although only 8% benefits firms with less than 50 employees. These account for about 65% of claimants, suggesting limited traction among smaller startups.

Recommendations

✓ Continue enhancing cooperation between the public and the private sector in R&D, with a focus on strengthening the involvement of domestic firms in multinationals’ innovation networks.

✓ Step up public investment in business R&D, prioritising applied and experimental research projects that could help provide solutions to key socio-economic challenges.

✓ Ease SMEs’ access to applied R&D by developing intermediary structures to facilitate networking and the exchange of information between universities and smaller businesses.

Infrastructure: Rebalance urban mobility towards more efficient and sustainable modes of transport

The government has launched a roadmap to overhaul the rail network, which is among the least electrified in the OECD, lacks competition, and plays a marginal role in both passenger and freight transport. Reducing the dominance of private cars in the mobility system would help lower high transport-related emissions. Car-centred transport exacerbates urban sprawl, undermining efficient land use and complicating housing and public service delivery in major urban areas. On the back of strong population growth, enhanced coordination of housing, urban and transport policies is thus essential.

Recommendations

✓ Implement the planned improvements to the public transport system in full and on time to support a behavioural shift away from cars.

✓ Improve the consistency of transport, urban and housing policies to promote compact settlements with easy access to transport links.

Taxation: broaden the tax base to reduce vulnerabilities to shocks

A more resilient revenue structure is needed to finance spending priorities in the medium term. Tax revenues are exposed to sector- and firm-specific risks, due to a heavy reliance on corporate and personal income tax revenues from multinationals. Placing greater emphasis on taxation of goods and services could result in a stabler and less distortive tax structure. Despite the high standard value-added tax rate, reduced rates decrease its yield, while the revenues from recurrent taxes on immovable property are below the OECD average.

Recommendations

✓ Develop a roadmap to diversify tax revenues in the medium term, for example by broadening the personal income and the value-added tax bases.

✓ Increase local property taxes and rates of the residential zoned land tax.

Recent progress on structural reforms

In November 2025, the government published its new housing plan (target of 300 000 new homes by the end of 2030) to accelerate housing delivery and improve affordability. The 2024 Planning and Development Bill aims to streamline housing and infrastructure planning processes. Six new health regions are being established to decentralise healthcare management and provide better integrated care services. The government introduced additional paid parental leave and expanded childcare provision and benefits to help counter high costs for households. Automatic enrolment in workplace pension schemes was introduced in January 2026. The R&D tax credit rate was increased to 30% in 2024, while first-year refund thresholds have been made progressively more generous – particularly for smaller R&D projects to enhance SMEs’ incentives to invest in innovation. The newly created Future Ireland Fund and Infrastructure, Climate and Nature Fund, financed through part of excess corporate tax revenues, will support long-term investment and transition costs. In September 2025, the government launched an Action Plan detailing 85 actions, with defined delivery periods to boost Ireland’s competitiveness and productivity performance.