Firms seek more tax goodies supporting innovation

Firms seek more tax goodies supporting innovation
By Millet Enriquez | Posted: 17 February 2011 2315 hrs

SINGAPORE : The Singapore Government is set to announce the details of its Budget 2011 on Friday.

And some analysts and small business owners in Singapore are hoping that this year's Budget will offer more tax goodies to support innovation initiatives.

Singapore-based technology firm XMI is hoping to take its portable speakers to the bigger markets of China and India.

And it is banking on its research and innovation strategy to keep its x-mini speakers ahead in Asia's competitive technology landscape.

Ryan Lee, CEO of XMI, said: "Within Asia in itself is difficult because then you are faced pricing competition from everywhere else...So we have tried to create lower end models of our products and lower cost models of our products so that we are able to hit a certain kind of price point to suit these markets."

Analysts said China and India are likely to lead in the creation of intellectual property in the coming years. And innovation will lead the way for Singapore to keep up in the future.

Alvin Liew, economist for global research at Standard Chartered Bank, said: "The push towards more R&D (research and development) being carried out in Singapore is certainly one of the long-term goals by the government and I would not be surprised to see more incentives given into this area."

Mr Liew believes these incentives may also likely be directed into areas where Singapore can develop an advantage, such as clean water technology and alternative energy sources.

The tax incentives for innovation were announced by the government during Budget 2010.

Under the Productivity and Innovation Credit announced in last year's Budget, companies can get a tax deduction of up to S$300,000 of their expenses in six activities.

These are in the areas of R&D, creation of intellectual property (IP), investments in design, and spending on equipment and software for automation, as well as workers' training.

The tax credits can be applied from year of assessment 2011 to 2015.

Some analysts said it makes sense to raise the tax credits to S$1.8 million, encompassing the six activities.

Professor Annie Koh, dean for executive and professional education at Singapore Management University, said: "Small companies find that they may need to spend more than S$300,000 on equipment. Large companies have already innate capabilities to do their own IP creation and IP registration. So lumping together will make total sense. Then we have the flexibility. I don't cap you but you justify for me whether you need more than S$300,000."

But analysts said this may require the creation of a separate government agency that will oversee these innovation activities.

Analysts said businesses in different cycles have different requirements for innovation.

While the small players are busy with IP creation and equipment acquisition, larger companies could be way past these stages and are now more involved in technology and design to commercialise their products.

- CNA/ms

- wong chee tat :)