Budget must focus on business and society

TODAY, much of the business community's attention will be focused on the Budget for FY2014/15, which is to be unveiled in Parliament by Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam. Business leaders and tax experts have submitted their wish lists, but Mr Tharman will have to balance their concerns against the economic and social needs of Singaporeans at large and the economy as a whole. And there are some key themes that merit special attention.

One of the highlights of the last three Budgets was tighter policies on foreign workers, including through gradual increases in worker levies and more stringent criteria for the granting of employment passes. Companies are still having a tough time adjusting to these changes. Many, especially multinationals, have also called for more certainty in labour policy, rather than constant adjustments. Thus, business is crossing its fingers that at least there will be no new tightening.

Part of the reason for tighter regulation of foreign workers was to boost productivity. But this remains a challenge and will be a long-haul battle, for which supportive policies will need to remain in place for a number of years. Thus, there is widespread support for extending the Productivity and Innovation Credit (PIC) scheme (which is due to expire in the current financial year). While the scheme is reported to have a decent adoption rate of around 70 per cent, there are ways to make it still more attractive. One is to extend for a longer period the 400 per cent deduction for qualifying R&D activities and to raise the expenditure cap of $400,000 per year. The scheme could also be made more flexible for SMEs by removing expenditure caps on the six individual qualifying activities against which they can claim credits. Expanding the number of activities to include other forms of innovation would also bring more companies - especially smaller SMEs - into the PIC net.