New building-tax scheme panned at roundtable

Participants say govt should rethink Land Intensification Allowance

THE new tax allowance scheme that replaces the Industrial Building Allowance (IBA) and aims to raise land productivity is not business friendly.

In fact, restricted to too few sectors, the Land Intensification Allowance (LIA) may actually inhibit the growth of industry ecosystems and raise business costs to uncompetitive levels, participants at a post-Budget roundtable said yesterday.

Ascendas chief financial officer Chia Nam Toon said that there is a ‘need to address this very carefully’, lest the nine qualifying sectors – singled out as ones which will move Singapore manufacturing up the value-added chain – are hurt too.

As a business park developer, Ascendas looks into the clustering effect of industries – where core players are supported by small and medium sized enterprises (SMEs) that may not fall in the same sector.

The LIA’s sectoral restriction could be counterproductive if it discourages such clustering, Mr Chia said.

KPMG executive director of tax David Lee agreed that phasing out the IBA seemed contrary to the strategy of nurturing industry ecosystems.

This involves attracting MNCs, he said, and the IBA continues to be a key incentive offered by locations such as Hong Kong, which compete with Singapore for global investments.

Building costs are significant expenses forked out, said Ernst & Young international and corporate tax services partner Choo Eng Chuan, who also called for the move to be re-examined.

Those who spoke up were in favour of not abolishing the IBA entirely and relaxing restrictions on the LIA.

Among numerous other Budget measures debated at the Institute of Certified Public Accountants of Singapore (ICPAS) roundtable, was the hike in foreign worker levies.

Steering away from usual comments about its impact on the construction sector, National Volunteer and Philanthropy Centre corporate development director Chang Che Hsien asked if non-profit and healthcare sectors could be exempted.

National Kidney Foundation financial controller Ingrid The said that up to 80 per cent of nursing homes’ employees are foreign and not easily replaced, and that costs cannot be passed on to needy patients.

Mr Choo added that the levy hike was unlikely to induce productivity gain in an already overstretched healthcare workforce.

SME voices were also represented at the table. Michael Tien, CEO of Atlas Sound & Vision, spoke about the gap in training grants for basic degrees while CEO of Greenpac Susan Chong proposed that the government provide bridging loans for SMEs to embark on patenting.

Yesterday’s session was co-chaired by ICPAS president Ernest Kan and MP Jessica Tan. Ms Tan chairs the Finance and Trade & Industry government parliamentary committee and will speak in Parliament when the Budget debate begins this afternoon.

Source: Business Times, 2 Mar 2010