Singapore's R&D tax in need of disruption

IN AUGUST 2017, Singapore's Finance Minister Heng Swee Keat mentioned at an industry event that investments in research and development (R&D) by businesses in Singapore grew 8 per cent year-on-year from 2010 to 2015. He also made the point that while the increase in R&D investment is encouraging, companies should not simply innovate in silos. Instead, they should be open to new possibilities and look outside of themselves, bringing together knowledge and insights across different areas, so as to really champion innovation and effect change.

In the same vein, hence, it can be argued that the impending demise of Singapore's Productivity and Innovation (PIC) scheme is counter-productive. Without the PIC, what would happen to the R&D momentum? Would the expiry of the scheme be such a disruption and affect the desire and motivation to innovate?

Singapore's neighbours - particularly Malaysia, Thailand and the Philippines - have started ramping up R&D tax incentive offerings. Further north, Hong Kong, taking a leaf out of Singapore's playbook, has introduced R&D initiatives similar to the offerings under Singapore's PIC scheme. Underscoring the importance of encouraging innovation and consequently R&D as a key driver of long-term economic performance, Hong Kong's Chief Executive Carrie Lam proposed in her maiden policy speech last October a 300 per cent tax deduction for the first HK$2 million (S$340,000) in eligible R&D expenditure and double-deduction (that is, 200 per cent) for the remainder.