Businesses here want more government schemes to help develop a strong core of Singapore-owned enterprises amid a challenging global environment, and rising labour and rental costs.
That was the key finding of a pre-Budget poll report released by professional services firm KPMG yesterday. The report was based on a poll of 106 companies and a series of focus group discussions with business leaders, in November and December last year.
KPMG hopes that its findings will be "the basis for next month's Budget and the Committee on the Future Economy in formulating policies and initiatives for Singapore economy".
"Singapore is no longer a place for cheap labour and the global economy is getting more volatile, so we should look at how to develop our own local enterprises that are anchored in the country while expanding overseas for growth," Mr Tay Hong Beng, KPMG head of tax, said.
"Small and medium-sized enterprises (SMEs) are competing for business and talent not only with larger companies, but government-linked and foreign multinationals as well. Heavier regulatory compliance requirements, such as surveys for research and development, and information required by various agencies for application of grants and tax incentives, also add to businesses' woes," he said.
But not all is doom and gloom. Focus group participants have suggested potential growth engines in areas such as healthcare and solutions for ageing, fintech and renewable energy, which can keep Singapore's economy vibrant.
The poll found that while a majority of respondents recognise a need for more focus on innovation and productivity improvements to develop more "Made in Singapore" goods and services, many pointed to insufficient recognition and support for such activities.
They say the incentive structure still favours firms "adding value rather than creating value".
About 60 per cent of SMEs surveyed say they have benefited from the popular Productivity and Innovation Credit (PIC) scheme, but many say it is not sufficiently effective and should be tailored to address different needs firms have at different stages of development in their business life cycle.
Businesses want, among other things, the PIC scheme to be further calibrated to provide higher cash pay out limits in the first three years when a business begins its productivity drive, the poll found.
"After that, the business should be on its own, rather than for the entire duration of the PIC scheme, so as to ensure more equitability in the way the scheme is administered," Mr Tay said.
Taking stock six years following the launch of the PIC scheme, Mr Tay noted that there should be a combination of broad-based and targeted incentives to encourage innovation and value creation.
"The focus could be on keeping costs low through spurring productivity in the initial stage, while shifting to igniting innovation and internationalisation in the growth stage," he said.
Other proposed measures include enhancing support for overseas ventures by making the process of claiming tax relief for overseas income simpler.
"Unilateral tax relief should be simplified and made less restrictive by allowing Singapore companies to get relief on foreign taxes levied on overseas income, regardless of whether there is a tax treaty in place," Mr Tay said.
KPMG tax partner Harvey Koenig noted that when businesses invest in countries such as China, they frequently suffer double taxation because sometimes the tax authorities there are not as sophisticated in implementing tax treaty rules.
"Within Asean too, a lot of tax authorities aren't as sophisticated. So when the businesses receive income from countries, like the Philippines, they do suffer taxes that they should not have suffered because it is supposed to be relieved under the relevant tax treaties," he said.
Mr Tay said grants from the Market Readiness Assistance scheme, which helps businesses with overseas ventures, should be at least doubled from the current $20,000, given that overseas regulatory and tax regimes are often significantly more complicated than that of Singapore's.
Other proposals include allowing tax amortisation for Singapore-developed brands.
"If I can think of a business model that can help businesses better manage, why should that not qualify as innovation?" Mr Tay said.
"If I have built a brand without making a lot of acquisitions of things, why can't they recognise the value I've created, and give a tax deduction on the brand, or the intellectual property I created?"