Effectiveness of Productivity and Innovation Credit Scheme

The following question stood in the name of Mr Alvin Yeo –

To ask the Deputy Prime Minister and Minister for Finance how successful the Productivity and Innovation Credit scheme has been in spurring productivity improvement, particularly in the industries that suffer the lowest productivity.

Mr Speaker, Sir, the Productivity and Innovation Credit (PIC) scheme is a broad-based tax deduction scheme, available to businesses from all sectors. Any company, small or large, can take advantage of the scheme.

It has only been one year since we have allowed PIC claims, starting with Year of Assessment 2011. Even so, the take-up has been promising. According to most recent data for the Year of Assessment 2011, 34,700 companies have claimed PIC. This is about 30% of active companies that have filed their tax returns. Among active and small companies with annual turnover of $10 million or less, 27%, or more than one in four, have claimed PIC. Of the six categories of investment eligible for PIC claims, automation equipment is the most popular, followed by training.

Usage of the PIC scheme is also well spread out across all economic sectors. Generally, between 20% and 40% of the companies in each sector have made use of the scheme, including priority sectors as identified by the National Productivity and Continuing Education Council (NPCEC). For example, about 38% of the companies in the construction sector and 32% in the wholesale and retail trade sector have taken advantage of the scheme.

The second year of PIC data will be available after companies file their tax returns for Year of Assessment 2012 by November this year. With greater awareness and familiarity in filing claims, we expect more businesses to benefit from the scheme and to be better equipped for continuous productivity improvement.

However, the effectiveness of PIC is not just about the take-up rate. Many businesses have become much more aware of the opportunities to enhance their productivity because of the efforts made by trade associations and business chambers to share knowledge and best practices. Earlier on, my colleague, Minister of State Teo Ser Luck had talked about the several roadmaps that were introduced for specific sectors to help uplift productivity in those sectors. As a further example, the Singapore Contractors Association and the Singapore Business Federation worked with the Inland Revenue Authority of Singapore (IRAS) in June this year to reach out to contractors to promote the PIC scheme alongside its construction productivity workshops as part of their efforts to improve productivity for the construction sector.

As a result of the many different types of activities in support of the productivity movement, we see more businesses acquiring a sense of urgency and building up the habit of productivity improvement. It will take sustained effort for our investments in productivity improvement to bear fruit. As mentioned by Minister of State Teo earlier, we need to see beyond the short-term fluctuations. Working with a broad spectrum of partners, the Government will continue to promote the PIC and other initiatives as means of sustaining the momentum.

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