Singapore must continue to position itself as an attractive destination for foreign direct investment, despite rising competition from other financial hubs, says KPMG Singapore and the Singapore Business Federation (SBF) in its joint Budget 2024 proposal.
The two organisations have released a set of recommendations on Jan 8, ahead of the upcoming Budget 2024 on Feb 16. Of which, the proposal has three focus areas — elevating Singapore’s leadership as a competitive regional hub; empowering local enterprises for global growth and competitiveness; and enhancing enterprise resilience and capabilities.
Under its focus on elevating Singapore’s leadership as a competitive regional hub, KPMG and SBF recommend for the government to strengthen Singapore’s tax regime.
Citing the Organisation for Economic Co-operation and Development’s Base Erosion and Profits Shifting (OECD’s BEPS) 2.0 rules as “near term challenges” for businesses, they note that this could shake up Singapore’s competitiveness as a country reliant on free trade and globalisation.
“The government can consider introducing new incentives that would fit into the category of Qualified Refundable or Marketable Tax Credits (QRTCs or MTTCs) to mitigate the impact of Pillar 2 for multinational companies affected by the new global minimum tax,” the release notes.
In addition, the firms also recommend the government to consider the renewal of the existing funds tax incentive schemes without an increase in tied economic conditions, and to re-examine the current tax incentive schemes for family offices.
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For single family offices in particular, KPMG and SBF say that some rules, like single family offices being disallowed to hold controlling stakes in private equity and venture capital investments if family members hold executive or managerial roles, should be re-examined. They note that this rule could come across as counterintuitive, as investors in these spaces are often
involved in the strategic operations of such businesses.
KPMG and SBF have also laid out recommendations for Singapore to explore establishing a data innovation hub, for the seamless sharing of data and connectivity across businesses, industries and governments.
This would look like broadening the definition of qualifying intellectual property (IP) for corporate tax purposes and enhancing the IP Development Tax Incentive, by incorporating a wider range of IP for writing down allowances.
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Next, the two organisations recommend for the government to drive up Singapore’s regional leadership in climate financing — by earmarking up to 1% of Singapore’s gross domestic product (GDP), which they think could draw additional capital from private sector and philanthropies, creating a blended finance hub.
Singapore most recently saw a dip in its rankings among the world’s most competitive economies, coming in one rank to place fourth in the Institute for Management Development’s World Competitiveness Ranking 2023.
To empower local enterprises for global growth and competitiveness, KPMG and SBF recommend the government to provide financial support for business transformation, digitalisation and artificial intelligence (AI) adoption.
“A tiered support approach for businesses in their digitalisation roadmap, starting with a lower
tier of 20% grant support for back office and operational digitalisation to the top tier of 60% for digital ledger and AI technologies,” the release notes.
In addition, the two firms point out that grant schemes, such as the Enterprise Development Grant, could be expanded to support digital projects where development work is led out of Singapore but involve resources from the region.
As enterprises are currently required to carry out the work in Singapore, this could hinder their progress should they be unable to tap on to the resources and skill sets for the development work in a timely manner, according to the joint release.
Noting the recent Singapore-Asia Taxonomy launch at COP28, KPMG and SBF says the need for a proficient workforce in the environmental, social and governance (ESG) is more critical than ever.
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They recommend for the government to establish a comprehensive ESG talent development roadmap, including strategic upskilling and reskilling initiatives, potentially incentivised through enhanced tax deductions for accredited training programmes and tax subsidies for employers offering clear training pathways.
The two firms also recommend measures such as broadening the Enterprise Financing Scheme –Green (EFS-Green) to increase lending by qualifying financial institutions to help smaller
enterprises kickstart their sustainability journey, and to explore environmental levies or taxes to promote green accountability.
Citing the latest SBF national business survey of 2023/2024 which found that businesses saw manpower challenges as a key concern for the new year, KPMG and SBF have recommended the government to address these concerns.
“Several adjustments could be made to the government procurement tender process, including
a review of tender packaging strategies, tiered allocation of tender packages and enforcement
of subcontracting requirements for larger companies,” they note.
The two firms also recommend a review of the Complementarity Assessment Framework (COMPASS) to allow a possible short-term relaxation on the diversity quota criteria, as companies have found it increasingly difficult to meet the criteria in light of the tight labour market.
It has also put forth the suggestion to set up an Alliance for Action (AfA) on business competitiveness to bring together the public and private sectors to pinpoint specific opportunities to implement targeted measures to mitigate cost escalation.
