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Refine PIC in Budget 2015 to help SMEs restructure: Deloitte (Amended)

Tuesday, December 30, 2014 - 16:56

THE government can do more to help small and medium-sized enterprises (SMEs) restructure, said Deloitte Singapore in its 2015 Budget wish list released on Tuesday.

For one thing, the accounting firm believes the effectiveness of the Productivity & Innovation Credit (PIC) scheme can be improved. It recommends combining the PIC cash payout across the relevant assessment years and increasing the payout cap instead of limiting it to S$100,000 per year of assessment.

It also thinks a new scheme should be introduced to reward innovative activities that are not deemed research and development (R&D) activities under the current PIC scheme.

Said Low Hwee Chua, partner and head of tax services at Deloitte Singapore and South-east Asia: "Learning from the German Mittelstand, we should look to provide a stronger platform for our SMEs to operate given that they are the engine of growth for the Singapore economy. Widening the PIC scheme to include more innovative activities - which may not qualify as R&D - appropriately rewards firms that pursue innovative solutions to improve productivity."

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Deloitte also said that one way to counter rising business costs is to increase the partial tax exemption from the first S$300,000 of normal chargeable income to the first S$600,000 of normal chargeable income for SMEs. Under this enhancement, the effective tax rate for SMEs with chargeable income of S$600,000 would drop to 8.4 per cent, from 12.7 per cent.

Deloitte has amended their press release to reflect that the effective tax rate for SMEs with chargeable income of S$600,000 would fall to 8.4 per cent, and not 7.8 per cent as it had originally stated.

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