'Merit' in extending productivity scheme

Josephine Teo hints that PIC may continue, following interest by firms

In yet another hint that a scheme giving tax incentives to firms that invest in improving productivity could be extended, Senior Minister of State for Finance Josephine Teo said there was "merit" in keeping it going.

She told The Straits Times yesterday that local firms have found the Productivity and Innovation Credit (PIC) scheme very useful and made a "strong request" to prolong it.

The feedback came amid the Government's ongoing review of the popular PIC ahead of next month's Budget announcement.

"Momentum is building up so there is merit in keeping the PIC available to businesses for a longer time," said Mrs Teo, without elaborating on how long a possible extension would be.

Introduced in 2010, the PIC gives tax deductions to companies that spend on productivity-related investments, such as staff training and patent or trademark registration.

The scheme is due to expire when the Government's 2014 financial year ends in March 2015.

Mrs Teo, who was attending an Edusave Awards presentation ceremony in her Bishan North ward, said more time is needed for the PIC scheme to make an impact on companies' productivity drive.

"It's just three years (now) and this is an effort that will probably take longer than that."

Her comments come less than two weeks after Minister of State for Trade and Industry Teo Ser Luck said the Government is considering prolonging the PIC.

The scheme allows firms to lower their taxable income or claim cash payouts based on up to $400,000 of spending in each of six categories of productivity- related investment, or up to a total of $2.4 million.

There have been suggestions from accounting firms, including Deloitte Singapore and PricewaterhouseCoopers, to make it available to companies for another two to three years.

Mrs Teo said the upcoming Budget will continue to pave the way for the Government to restructure the economy, such as by making it less reliant on foreign manpower. She added that most companies are already "feeling the pain" from the tightening of foreign manpower supply.

"As you feel the pain, you will also get a stronger signal to do things differently," she said. "Some have figured out. Some are still getting used to the idea."

Mrs Teo also said that the Government will be strengthening its support for families, in areas such as health care and education.

jermync@sph.com.sg

This article was first published in The Straits Times on Jan 27, 2014