Singapore's tax professionals are advocating that Budget 2014 should be a “Keep it Simple, Singapore” (KISS) Budget in order for the country to gallop ahead in its productivity drive.
Results from an internal survey conducted by the Singapore Institute of Accredited Tax Professionals (SIATP) on what Singapore Budget 2014 should entail can be summed up into two themes – feedback on initiatives that would reinforce Singapore’s competitiveness and secondly, a call for Budget 2014 to be an understanding one for its people. Underlying both themes is a common thread that productivity and competitiveness can be given a boost by simply keeping things simple.
To ensure that Singapore remains competitive in the IP tax landscape especially in Asia, Singapore should consider building upon the incentives framework in the creation stage and introducing appropriate tax incentives with preferential tax treatment (through either reduced tax rates or exemption of qualifying IP income) for the commercialisation of qualifying IP that could also include unpatented intangibles arising from approved R&D activities.
Whilst Singapore has introduced tax benefits and incentives for the earlier phase of IP creation during the research & development (R&D) stage, there is currently no specified back-end tax benefit or incentive in connection with the commercialisation of IP from Singapore.
This is in contrast to other countries which have both front-end incentives such as R&D incentives, and back-end incentives such as patent/innovation box regimes, for commercialisation of IP, which is an important key component in the IP lifecycle.
Other than the tax incentives for IP creation, another government initiative that has worked well is the Productivity and Innovation Credit (PIC) Scheme. SIATP proposed that this scheme be extended for another five years till YA2020 or that it becomes a permanent feature of Singapore’s corporate tax system. This will boost productivity further.Simple, less restrictions
The tax professionals also proposed that the restrictions of PIC be reviewed, particularly for training fees incurred by sole-proprietors and partners. These fees currently do not qualify for tax deduction under the PIC scheme as such expenditure are deemed to be personal and private in nature and are not deductible as a business expense.
Currently, only real estate agents, representatives of financial advisors or capital markets services licence holders, insurance agents and hirers of taxis from taxi service operators are eligible for claiming training expenses under PIC.
Sole proprietors and partners in tax consultancies and public accounting firms are also required to go for training every year but these training fees are not eligible for PIC claims. This training expenditure is not personal or private in nature and the PIC scheme should not seemingly unfairly penalise business owners who incur training expenses for the purpose of running their consultancy operations. Flexibility on Expenditure Cap
Simplifying rules continue to be the theme in the area of expenditure limits. Greater flexibility could be introduced in applying the expenditure cap under the Productivity and Innovation Credit (PIC) scheme. A combined cap for all six activities or a higher cap for the more commonly undertaken activities would encourage companies to invest more in the activities that are relevant to their businesses.
For example, SMEs could be allowed to claim higher PIC deductions or allowances for training and the acquisition of information technology and automation equipment as these are the two activities that are of relevance to them. Similarly, multi-national corporations (MNCs) which use Singapore as a home base for innovation-led activities have the potential to incur significant amounts on research and development (R&D) and the acquisition of intellectual property, and thus, would need a much higher expenditure cap for these activities.
Aligning Taxes and Understanding People
To reflect a Budget that understands and building on the firm foundations of current schemes, it is also proposed that the current cap of $5,500 course fee relief be increased to $8,000 for individuals who attend courses relevant to their employment or trade. With the rising costs and the nation’s drive towards higher productivity, it is thus proposed that the cap be increased.
In line with the 30% corporate income tax rebate that was announced for YA 2014 and YA 2015, the 30% / 50% personal income tax rebate already announced for YA 2013 should be extended in YA 2014 and 2015.
To reflect current economic situation, it is also proposed that spouse relief of $2,000 be increased to $4,000.
As part of the government’s efforts to encourage procreation and aid parents in the progressively high cost of living and raising children in Singapore, the quantum of child relief is grossly inadequate and should be reviewed. It is proposed that qualifying child relief (QCR) of $4,000 and handicapped child relief (HCR) of $5,500 be increased to $5,000 and $7,000 correspondingly. The maximum relief per child (which includes QCR/HCR and working mother child relief) should be increased from $50,000 to $80,000.
“Increasing productivity is not necessarily about big investments in technology or R&D," says the Chairman of SIATP, Dr Ernest Kan. "Sometimes, it is all about reviewing what has been done right, leverage on it with further improvements. Sometimes increasing productivity is really all about keeping processes and things simple so that businesses can focus on their core areas.”