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Observers call for tweaks to expand budget’s reach

Tan KW
Publish date: Fri, 23 Feb 2024, 07:43 AM
Tan KW
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SINGAPORE: From incentivising global businesses and investors as a draw to improving the skills of the workforce, observers say this year’s budget continues to place Singapore’s competitiveness as a priority but suggested tweaks to expand its reach.

Some analysts proposed more features to be added to the refundable investment credit (RIC) scheme to expand its reach, while others caution against exacerbating economic disparities as the country moves towards high-tech ventures.

Tan Tay Lek, PwC Singapore’s corporate tax partner, said the introduction of the RIC scheme demonstrates Singapore’s resolve, particularly as it comes in the face of international tax changes that are beyond the government’s control.

Under the RIC, companies that carry out work in areas such as green transition and research and development (R&D), can get up to 50% of support on expenditures like manpower costs and freight and logistics costs.

Tan suggested that the government can enhance the RIC scheme by making it available to businesses that are not as expenditure-heavy, such as tech solutions, but also bring economic activities to Singapore.

“For instance, if a firm achieves sales or revenue growth in Asia because of the investments in headcount, training, R&D in Singapore, the government can give them the RIC.”

Yvaine Gan, the global investment and innovation incentives leader at Deloitte Singapore, said the government can look at having output-based features.

By this, she means that the RIC can include output or volume-based features, so the credits can be awarded based on a manufacturing company’s volume of products made or a trading company’s volume of trade that flowed through Singapore, which would then secure high-value activities here.

Associate Professor Simon Poh of the National University of Singapore’s Business School’s accounting department said the RIC plan will play a very important role as it acts like a grant that global firms can use to offset the corporate tax they pay, without violating a global initiative.

The initiative, to kick in here in 2025, aims to ensure a global minimum effective tax rate of 15% for large multinational enterprises (MNEs).

Observers said investments to be made by Singapore including S$1bil into artificial intelligence (AI), an additional contribution of S$3bil into the Research Innovation and Enterprise 2025 plan, as well as the topping up of S$2bil to the National Productivity Fund, will pave the way for the republic to move towards these areas and remain relevant in the world.

SGTech chair Wong Wai Meng welcomed the funding, saying it would help position Singapore as a test bed for innovations and attract investments from companies to set up R&D hubs and innovation centres of excellence here.

However, he warned that it is vital to ensure that the benefits of these investments trickle down to all stakeholders, particularly small and medium enterprises (SMEs).

Wong suggested that a portion of the S$1bil designated for AI initiatives should be directed towards SMEs. “Neglecting to do so could exacerbate economic disparities, with multinational corporations thriving while local SMEs struggle to keep up with technological advancements.

“It’s imperative to ensure that the opportunities and possibilities generated by these investments are accessible to all, thus avoiding the creation of a digital divide.”

Yoon Young Kim, cluster president for Singapore and Brunei at Schneider Electric, said investors are likely to be attracted to a business ecosystem that encourages collaborations.

So beefing up the partnerships for capability transformation scheme will promote strategic partnerships between larger companies and SMEs, he said.

 - ANN

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