SINGAPORE: As the Republic works towards a future where economic growth is driven by creating value, research and development (R&D) by firms must continue to grow. Tax consultants have said that they expect this issue to be addressed in Budget 2016, with adjustments to existing schemes to promote innovation.
The Government has set aside S$19 billion of funding under the Research Innovation Enterprise 2020 Plan (RIE2020).
Amid the push for innovation, R&D investment by firms in Singapore has gone up. Latest statistics from research agency A*STAR showed that private-sector R&D spending hit a high of S$5.2 billion in 2014, up 16 per cent from the year before.
The biggest spenders were the electronics sector, biomedical sciences and precision engineering, infocomm and media, and chemicals.
EY’s business incentive and R&D advisory partner, Tan Bin Eng, said: "If you look at where R&D is heading, there are obviously certain sectors which seem to have done better in terms of R&D.
“Sectors like electronics for example, infocomm and media, are given a lot of focus around technology, around digital. Even in areas like chemicals, biomedical sciences, these are traditional strongholds of Singapore, and they continue to be sectors that are quite strong in the space of R&D."
Meanwhile, R&D expenditure by small- and medium-sized enterprises jumped 38 per cent to S$800 million in 2014.
According to tax experts, such investments have been supported by various Government schemes, including the Productivity and Innovation Credit (PIC) scheme. They added that they expect the scheme to be tweaked in the upcoming Budget, to target specific needs.
Among the six categories under the scheme, tax experts cited two which have seen relatively higher take-up rates.
Said PwC Singapore’s corporate tax advisory services partner, Tan Ching Ne: "PIC for IT and automation equipment, and PIC for staff training are two categories that really point towards productivity.
“But what about innovation? That's the other four categories of the PIC scheme. The benchmark for a qualifying R&D project to claim tax benefits is high. With that, not all companies' innovation would quality for the R&D claims."
According to the tax authority, about 142,000 claims were made under the PIC scheme in 2015, which is more than double from the year before.
Minister for Finance Heng Swee Keat will deliver the Budget statement on Thursday (Mar 24) at 3.30pm in Parliament.