Call for tax incentives to boost productivity

Tax experts want Budget measures to help firms take advantage of emerging technology

Tax incentives aimed at boosting productivity and helping businesses take advantage of emerging technologies should be included in next month's Budget, according to a leading industry body.

The Singapore Institute of Accredited Tax Professionals has proposed a raft of measures along these lines. These include enhancing the existing research and development (R&D) scheme, introducing a double deduction scheme for training expenses, encouraging R&D activities in start-ups and small and medium-sized enterprises (SMEs) and introducing a fintech tax incentive.

The institute, which received feedback from tax professionals across industries like accounting and law firms, educational institutes and commercial businesses for its budget proposals, wants a programme to replace the Productivity and Innovation Credit (PIC) scheme when it ends this tax year.

It has proposed that either the Economic Development Board or Spring Singapore oversee an initiative where qualifying expenditure on approved R&D projects could see an additional 100 per cent to 200 per cent deduction, subject to a suggested annual cap of $500,000.

This mirrors schemes elsewhere. Thailand grants up to 300 per cent tax deductions for R&D expenditure carried out in-country while Hong Kong has a 300 per cent tax deduction on the first HK$2 million (S$338,250) of qualifying R&D expenditure, with a 200 per cent deduction on expenditure after.

The expiry of the PIC scheme here would also mean there will not be any specific tax programmes for businesses to offset training costs.

This could be tackled by introducing a double deduction for training expenditures, with a suggested annual spending cap of $500,000, said the institute in its wish list released yesterday.

Start-ups and SMEs should also be considered for a double or triple deduction on qualifying R&D expenditure, which would provide an attractive environment for new firms to establish themselves in Singapore, and also provide an incentive for companies to innovate.

The institute also suggested a concessionary tax rate of 10 per cent or lower targeted at the fintech sector to help businesses innovate in the areas of mobile or cashless payment systems, blockchain technology, cryptocurrency and initial coin offerings.

This would further develop the fintech ecosystem here and would be on top of existing initiatives like the Financial Sector Technology and Innovation Scheme overseen by the Monetary Authority of Singapore.

Institute chairman Gerard Ee said that with the economy set to grow, targeted tax incentives would form a "hat trick" to help accelerate companies' growth and productivity.

On Wednesday, the Singapore Business Federation's budget recommendations floated the idea of developing and attracting "unicorns" - start-ups valued at over US$1 billion (S$1.32 billion) - as part of a proposed growth strategy by positioning the country as a hub for high-potential firms and investors.

The SBF also called on the Government to support the establishment of a voluntary supplier payment code to enable SME suppliers to benefit from prompt payments, enabling better cash flow management.

Earlier in the week, professional services firm KPMG called for more flexible manpower policies to help companies go digital, such as relaxing the Employment Pass framework to encourage firms to bring in foreign talent with key skills, such as cyber security experts.

A version of this article appeared in the print edition of The Straits Times on January 19, 2018, with the headline 'Call for tax incentives to boost productivity'. Print Edition | Subscribe