Top Stories


    Feb 24, 2014

    Revisiting the 'Credit' in PIC

    PRODUCTIVITY and Innovation were again key themes in the Budget statement this year.

    Judging by the calls from many sectors of society during the pre-Budget season, including those from respondents to KPMG's own pre-Budget survey, it seemed that the extension of the popular Productivity and Innovation Credit (PIC) scheme beyond next year would be a foregone conclusion.

    The announcement that the PIC would be extended for another three years, until 2018, thus came as little surprise.

    Less expected was its enhancement in the form of PIC+.

    In this, the expenditure cap for claims is increased to $600,000 a year, and up to $1.8 million over three years.

    Clearly, this enhancement is targeted at small and medium-sized enterprises (SMEs).

    It is intended to support and encourage them to invest in equipment and technology required to become more productive, so that they can look forward to longer-term and sustainable business growth.

    With similar cheer, the Government heeded calls this year to encourage more pervasive innovation.

    Announcements were made to the effect that more would be done to encourage greater investments in innovation activities, research and development (R&D), the exploration of new markets, and building of new capabilities using information-communication technology (ICT).

    The ICT for Productivity and Growth programme will provide funding for companies, especially SMEs, to tap on more innovative ICT solutions for growth.

    We were thus also cheered by the extension of the R&D incentives for 10 years, to 2025.

    It recognises that innovation activities need time to bear fruit. This was exactly what we had called for in our Budget wish list.

    With productivity now gaining traction almost three years after its announcement in Budget 2010, and the focus on greater innovation now addressed in Budget 2014, perhaps it is time to start thinking about the "Credit" in PIC.

    While that is probably not how "Credit" in PIC was intended, it is useful to think of Credit as the value of the brand a company builds - a sum of its efforts at greater productivity and innovation.

    In KPMG's Budget wish list over the past two years, we had expressed a desire to see more done to tangibly recognise the efforts that Singapore companies spend on creating their unique Singapore brand.

    We had called for a tax incentive by way of a tax allowance for internally generated brands, as a signal of the Government's commitment to encouraging greater value creation through innovation.

    An incentive recognising the value of a Singapore-generated brand would depart from the usual government schemes, where subsidies or tax benefits are based largely on what a company spends.

    Since companies purchasing an established brand enjoy a tax benefit, it is logical that the same benefit be enjoyed by the company that built the brand.

    Further, it would recognise that building a successful brand is a culmination of ideas, efforts and resources of one company over a long period of time - for which capturing expenditure information alone cannot express.

    We are therefore disappointed that nothing new was announced in Budget 2014 to support Singapore companies in building their unique brand.

    It seems a lost opportunity to address the tax disparity between brand purchasers and brand developers.

    The implementation of the Asean Economic Community next year brings with it new market opportunities.

    Having more strong Singapore brands would stand our city-state in good stead to take advantage of these opportunities.

    We can therefore only hope that this is something the Government can look into for future Budgets, to encourage local companies to pursue originality and value creation.

    When more is done to incentivise brand building among Singapore's enterprises, we can conclude that productivity, innovation and credit will all have been addressed.

    Mr Chiu Wu Hong and Mr Harvey Koenig are Tax Partners at KPMG in Singapore. The views expressed are their own.