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|Amidst the concerns businesses have, companies in Singapore are looking forward to measures in Budget 2013 that will help them manage labour constraints and business costs, and boost long term business performance through branding and innovation activities. This is according to a new report published by KPMG resulting from a Singapore pre-2012 Budget forum it organised at the end of October 2012.
Mr Tay Hong Beng, Head of Tax Services at KPMG in Singapore said: "As the year has just begun, many companies are looking ahead to Budget 2013 for measures to help them manage labour constraints and business costs. It is important to gather the Singapore’s business community’s views on possible long term strategies and decisive short term measures that will be useful in helping businesses innovate and seek opportunities for the future.”
Participants’ main short terms concerns were around labour constraints and operating costs:
- 37 percent indicated labour constraints as their key short term challenge facing their organisations over the next year, and another 26 percent identified operating costs as their key challenge
- 28 percent hope to see more measures to manage business costs and cash flows unveiled in Budget 2013
Looking forward, participants felt that while focus has been on cost cutting and process efficiency to improve productivity, it is also important that value creation measures, such as branding and research and development (R&D), are addressed to improve long term business performance. In this regard:
- 39 percent would like subsidies on costs related to branding and marketing expertise, in order to improve longer term business performance through development of local enterprises’ brands
- 35 percent feel that innovation activities merited more government support in view of the higher risk involved
- 31 percent feel that less prescriptive productivity incentives and schemes would help them understand and participate in the schemes
From a broader business perspective, participants also provided views on Singapore’s attractiveness as a business destination, and addressing social objectives in Singapore:
- 27 percent feel that Singapore should simplify its tax incentives to attract new investments from both Singapore and foreign businesses
- 35 percent would like more support for businesses to introduce or improve a family-friendly work environment
Mr Tay added: "With overall slowing demand, increasing constraints and escalating costs, companies in Singapore are looking at how the Government can come up with more innovative ways to cushion the impact of sluggish economic growth and assist companies to continue staying relevant in this highly challenging and competitive environment."
Singapore Budget 2013
Areas identified for likely interest in Singapore Budget 2013 arising from these discussions are:
Help enterprises build trusted and reliable brands
- Introduce schemes to support the growth of local brands and promoting made-in-Singapore products and services. This could help build local enterprises with trusted and reliable brands on a sustainable basis.
- Implement new tax incentives to exempt income from the commercialisation of local brands to reward companies that do well from their branding exercises.
Encourage businesses to play a part in achieving social objectives
- Help employers restructure jobs to improve the productivity and employability of workers so that more jobs can be retained.
- Offer grants and incentives to help companies capitalise on and manage an ageing society and workforce. For example, since the Government is encouraging the hiring of older Singaporeans, the current tax deduction cap for medical expenses should be removed in relation to older employees (say above 50 years old).
Enhancing innovation locally
- Simplify and rationalise productivity and innovation incentive schemes to encourage higher participation. Widening the scope of eligible expenditure and reducing prescriptive conditions would improve accessibility to these schemes.
- Increase the cash payout limit under the Productivity and Innovation Credit (PIC) scheme for innovation-related activities – currently, companies can receive up to $60,000 per year on eligible spending for productivity and innovation measures under the PIC scheme. There should be separate cash payout limits for innovation-related activities such as purchase of intellectual property and research and development (R&D), in recognition that there are higher risks involved with undertaking innovation-related activities.
- Encourage greater private sector R&D to attract corporate R&D laboratories to Singapore by extending the enhanced R&D tax deduction to R&D centres of multinational companies.
Singapore as a premier Asian business hub
- Enhance Singapore's tax treaty network by updating older tax treaties with countries such as Thailand, Indonesia and Australia and expanding the network to new countries.
- Establish tax-free zone in the ASEAN Economic Community by exempting all withholding taxes within ASEAN to encourage freer flow of capital and technology.
- Strengthen strategically important industry sectors such as the financial and marine industry by reviewing and enhancing existing tax measures.
- Provide more certainty of tax rules to enhance Singapore’s attractiveness. Budget 2012 introduced a very welcome change to provide certainty of tax treatment for disposals of equity investments. However, this concession is only available till 2017, and as such, there remains an element of uncertainty.
- Implement measures to help businesses with rising costs by extending the SME cash rebates, amounting to up to $5,000 for Year of Assessment 2013, to help with business costs and inflationary pressures.
Mr Tay concluded: "Rapidly aging populations in the developed economies, the continuing troubled economies in the Eurozone and a still-recovering US provide deep-rooted worries about future economic prospects. However, these trends have also fueled the shift of economic power towards Asia. This represents unique opportunities for Singapore to become a great potential as the preferred centre for investments into Asia. We are hopeful that the Government will look at the areas identified in the upcoming Singapore Budget 2013 to spur productivity and innovation, foster entrepreneurial spirits and position Singapore appropriately as an important regional investment hub.”