Need to review R&D tax incentive scheme to boost innovation

WITH the advancements in technology, innovation in all industries will accelerate. Singapore has long foreseen the need to embrace innovation in all forms, but it is not alone in gearing up to be an innovative economy. Developed countries such as the United Kingdom, Australia and Ireland have long histories of promoting innovation. Closer to home, China has also made a strong focus and push towards innovation.

In its Global Innovation Index 2016, the World Intellectual Property Organisation (WIPO) says that innovation requires continual government investment. Key policy levers for governments to support innovation are a combination of direct subsidies and tax incentives (such as R&D credits).

The combination of direct subsidies (which are more targeted) and tax incentives (which are broad based) recognises that while certain types of innovation can be targeted, there is need for a broader policy to "let a hundred flowers bloom". Studies have shown that productivity and innovation capacity across all industries matter more than developing a few innovation champions, and a broad-based policy approach is therefore critical.