Wednesday, January 5, 2011

Incentives needed to boost finance sector, go green

MAKING Singapore a more attractive centre for wealth management and innovation in green technology are among the measures that KPMG hopes Budget 2011 will provide.

Alongside calls to spruce up tax incentives for global companies to use Singapore as a springboard into Asia and suggestions to make Singapore a more attractive place to live and work for individuals and families, KPMG yesterday also had specific recommendations to help boost wealth management and innovation activities here.

Enhancing tax concessions for Islamic financing by including all syariah-approved Islamic transactions could allow for more tax certainty and save application time, and could encourage taxpayers to make use of Islamic finance to raise funds and 'help kick-start the the local Islamic financing industry', KPMG said.

It also suggested that the concessionary tax rate offered via the FSI-Fund Management scheme be lowered from 10 per cent to 5 per cent, 'to attract the best funds and fund managers' to Singapore.

One other suggestion was that the scope of designated investments for which funds can qualify for the tax-exemption incentive be expanded to reach beyond traditional financial securities and include intellectual property rights as well as local infrastructure assets and property.

'It is important that Singapore is able to carry itself as a conductive and effective location for wealth management leveraging on its highly reliable and efficient financial sector,' said Tay Hong Beng, head of tax, KPMG in Singapore.

Turning to Singapore's aspiration to be a global innovation centre, Mr Tay said that more can be done to milk the commercial potential of intellectual property creation here.

While he acknowledged that 'fiscal incentives alone do not decide where companies locate innovation related activities', Mr Tay thought that such innovation incentives must stay competitive. The US has just renewed its research and development (R&D) tax credits programme, Taiwan has announced a fresh round of tax incentives and Australia has been debating the direction of its R&D tax incentives too, he said.

To get corporate labs and R&D centres of multinational corporations to stay on in Singapore past the expiry of their existing Research Incentive Scheme for Companies grants, KPMG thinks that the R&D tax deduction should be extended. It also suggested that royalties earned on intellectual property developed in Singapore can be tax-exempt of subject to a lower tax rate, so that companies commercialise their R&D output here instead of moving it offshore.

And in line with this innovation theme, KPMG thinks that Singapore can take the lead in promoting the development of green and clean technology solutions via incentives such as a 10 per cent 'green tax credit' on the costs of developing and implementing such solutions, or a doubling of the capital allowance which can be claimed on green plants and equipment. Or the property tax on green buildings could be brought below the current 10 per cent rate levied on commercial properties, KPMG said.

Its wishlist echoed in part demands for a lower corporate tax rate raised by businesses via a Singapore Chinese Chamber of Commerce and Industry pre-Budget survey released earlier this week.

KPMG suggested that the 15 per cent tax rate for companies entering Singapore to set up regional headquarters in particular be reduced to make it more of an incentive.

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