Transforming Finance? Singapore CFOs Have the Edge

by Cesar Bacani, 04 July 2012

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Management

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finance transformation productivity tax

Almost everyone at Singapore PR consultancy Catherine Ong Associates has been issued an iPad. This was made possible by the country’s Productivity and Innovation Credit (PIC) tax programme, which allowed the company to offset part of the expenses against its tax liabilities. “It works out to about a third of the cost after accounting for the productivity incentive,” estimates CEO Catherine Ong.

Virtually every company in Singapore is eligible, including branches and subsidiaries of foreign corporations. “Basically, for every dollar you invest, the cash outlay that you have to put in is only 32 cents,” says Phua Cheng Boon, Financial Controller and Treasurer at S$33.4-million-a-year maritime rigging and safety systems company Teho International.

“Your total cost of ownership gets reduced,” adds Balasubramanian Suryanarayanan, Group CFO and Finance Director at global tyre maker Mindtrac. “Why wouldn’t anyone not look into that?”

Why not, indeed? And why wouldn’t other jurisdictions follow Singapore’s lead? Cost may be an issue for some countries – the Singapore government estimates that tax foregone for the first year of the five-year scheme came to S$650 million (US$509 million).

But the long-term pay-off may be worth it. One of the objectives is to enhance business productivity across the board by encouraging companies to adopt automation, enterprise software, cloud computing and other productivity tools. The PIC can also be applied to subsidise the cost of training.

In the past, some CFOs may have struggled to find the funds for productivity enhancement, including finance transformation, given the competing claims for company resources. With PIC, there is more room to make such investments.

The scheme can even be a source of cash. Starting July this year, companies can choose to convert up to S$100,000 in qualifying expenditure into a non-taxable cash payout (instead of a tax credit or deduction) equivalent to a maximum of 60%, payable quarterly.

That’s S$60,000 (US$47,000) a year – a useful windfall for a small start-up with cash flow issues. The percentage was previously set at 30% and the company could get access to the cash only at the end of its financial year.

400% Tax Benefit

“Any company, be it small or large, new economy or old, can take advantage of the scheme,” said Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam, when he delivered his budget address in February.

Lots of the professionals

Submitted by James Loftcraft on 14 July 2012 - 8:33pm

Lots of the professionals from www.absolutewealth.com have already acknowledged that Singapore is one of the places where financial specialists are at their best.

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