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Deloitte suggests refinements to PIC scheme in Budget 2015 wishlist (Amended)
THE Economic Development Board (EDB) - rather than the Inland Revenue Authority of Singapore (IRAS) - should be the agency that assesses whether companies' proposals qualify as R&D projects eligible for grants under the government's Productivity & Innovation Credit (PIC) scheme, says Deloitte Singapore.
This was among a number of recommendations that the accounting firm made in its Budget 2015 wishlist released on Tuesday.
Saying that the government can do more to help small and medium-sized enterprises (SMEs) restructure, Deloitte noted that, under the current system - which should be changed - the tax authority is the one that performs a technical assessment of whether a company's proposed activity qualifies it as a research and development project.
"It may be beneficial to divorce the technical and financial assessment responsibilities - leaving IRAS with the assessment of the financial aspect, this being its core expertise, and forming a separate technical assessment team or utilising a more suitable body such as the EDB. This will greatly enhance the uniformity of the technical queries."
Deloitte had other recommendations on the PIC scheme - that the PIC cash payout across the relevant assessment years be combined and that its payout cap be raised from the S$100,000 per year of assessment.
The firm added that one way to counter rising business costs is to increase the partial tax exemption for SMEs from the first S$300,000 of normal chargeable income to the first S$600,000.
Under this enhancement, the effective tax rate for SMEs with chargeable income of S$600,000 would fall from the current 12.7 per cent to 8.4 per cent.
Low Hwee Chua, partner and head of tax services at Deloitte Singapore and South-east Asia, said: "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."
Elsewhere in its 20-page Budget 2015 wishlist, Deloitte urged the government to consider granting medical insurance relief for premiums paid by resident individuals on medical or hospitalisation policies, up to a limit of, say S$3,000. This would help to ensure that individuals and their families are adequately covered to cope with rising healthcare costs, it said.
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.