SINGAPORE - Professional services firm Deloitte is pitching a slew of changes to Singapore's tax regime, under recommendations put forward on for Budget 2020.
Intellectual property (IP), research and development (R&D) and human capital investments are some areas where Deloitte urged the authorities to tweak tax policies.
The suggested changes could make the Republic a more attractive place to do business, it argued in its report on Monday (Nov 18), citing globalisation and the growth of a digital economy as key influences.
For instance, Singapore could introduce tax credits for employers that invest in training staff who do not stay in their jobs, "to redistribute some of the risks of training employees from the employer", since the whole economy benefits from a skilled workforce, Deloitte said.
The firm added that such a tax credit on the costs of training workers, which it dubbed an allowance for "unrealised investment in human capital", might encourage small and medium-sized enterprises (SMEs), in particular, to invest in their staff, even if the companies are unable to impose a service bond or take other steps to retain those employees.
On the innovation front, Deloitte called for the government to hike the tax deductions on certain R&D activities to 300 per cent of the investment sum - up from 250 per cent now - to bring Singapore's incentives in line with neighbours such as Hong Kong, Indonesia and Thailand.
The firm also wants an expanded scope of qualifying activities and expenses, to include R&D conducted overseas, as well as overheads beyond the staff costs, consumables and fees paid to an outsourced R&D provider that are now covered by the tax scheme.
"Greater benefits could also be offered to SMEs since R&D investments, by definition, are inherently risky," Deloitte said in its report.
"Higher R&D tax credits could be granted to SMEs or businesses with lower revenue. In addition, businesses with unused tax credits (due to insufficient taxable profits or losses) could be allowed a refund/pay-out of those tax credits. SMEs may be more willing to undertake R&D activities if the financial risks of doing so are lower."
Meanwhile, Deloitte also recommended enhancing the scope of write-down allowance claims that Singapore companies can make when they acquire IP rights.
Companies must now typically acquire both legal and economic ownership of these rights before they can make the claims on the capital expenditure incurred in acquiring the rights.
But Deloitte suggested relaxing the rules so that companies can make a 100 per cent claim when only economic ownership of the IP rights is transferred, while the threshold could be raised to 150 per cent if companies acquire both legal and economic ownership.
Deloitte also called for the extension of incentives that are set to expire in the next two years, such as tax breaks for venture capital funds' income or divestment gains, the automatic double tax deduction for local businesses that are internationalising, and the mergers and acquisitions allowance granted to companies that buy over other businesses for price tags of up to $40 million.
As for the personal income tax regime, suggested changes included introducing infant care and childcare reliefs, and granting what is now the working mother's child relief to all parents, gender notwithstanding.
Said Liew Li Mei, Deloitte Singapore's international tax leader: "Tax certainty and clarity... could become competitive advantages for Singapore as tax policies across the world gravitate toward international standards and impose limits on the ability of sovereign countries to shape domestic tax policy."