As published on uk.finance.yahoo.com, Monday 7 February, 2022.
Environmental, social, and corporate governance (ESG), global tax and enterprise support measures are the highlights among recommendations KPMG Singapore has for the 2022 Singapore Budget.
The 2022 Budget Statement will be delivered in Parliament on 18 February at 3.30pm by Finance Minister Lawrence Wong.
On the ESG Front, KPMG recommends tougher regulations against greenwashing, and this includes independent verification of ESG data for more accurate data amidst rising investor’s expectations.
Funding is also a key component in pushing ESG efforts and KPMG suggests that Singapore launches a green financing bank to focus on funding sustainable infrastructure projects in the region.
"Singapore needs to continue to innovate to stay attractive, and it has to position itself as a choice destination for green finance, wealth and asset management, as well as technology," Ajay Kumar Sanganeria, Partner, Head of Tax, KPMG in Singapore, said.
"In the near future of work, Singapore's focus will need to involve building a progressive economic and tax structure that allows the country to take bold steps to grow, while mitigating transition pains and ensuring that no one is left behind, he said, adding "this will be the recipe for building lasting success in an economic sunrise.”
“Even though most banks and multilateral agencies have started lending with an ESG lens, it will still take a few years before their portfolios decarbonise, given the nature of their lending to various sectors of the old economy,” said KPMG.
The Singapore Exchange could support this initiative by becoming the preferred location for the issuance of green bonds. Other suggestions to support the ESG efforts include investing in alternate energy sources through setting up a S$1 billion Green Energy Investment Fund and encouraging landlords to have green buildings with up to 200 per cent tax deductions.
The new global tax rules could have a significant impact on Singapore but there are still opportunities to leverage on. KPMG recommends:
Refundable research and development tax credits, writing-down allowance for intangible assets and expanded mergers and acquisitions (M&A) allowance scheme to boost Singapore’s competitiveness
Enhanced Regional HQ incentive for multinationals (MNCs) through expanding on current efforts with the introduction a concessionary tax rate of 10 percent for income from regional HQ functions for businesses that still benefit from tax incentives
Incentive packages to attract high-growth companies and factories of the future
KPMG suggests shoring up on factors to attract MNCs and manufacturing giants will become more critical. This will include developing special incentive packages targeted at these companies with clear tax and non-tax measures. These serve to promote Singapore as a regional headquarters of choice and a location for factories of the future.
KPMG also recommends another package “Factory of the Future” incentive to help the local manufacturing scene to adopt cutting-edge technologies to improve processes and produce high-value goods.
With supply chain issues have taken the spotlight in 2021 and Singapore can take the lead in the global recovery. KPMG recommends setting up Cognitive Decision Centres that leverages on predictive toolsets to allow Singapore to increase visibility of supply chains, identify potential shortfall and react quickly.
KPMG also recommends support for enterprise expansion and to attract unicorns.
“In the immediate term, cash flow will remain a focus for businesses amid increasing costs on all fronts and manpower limitations. These factors are expected to impact businesses and their ongoing transformation efforts to become more productive and sustainable.
Despite this, many are eager to capitalise on M&A and organic growth strategies to seize new opportunities. It will be key to provide more targeted financial support, with a more gradual phasing out of these measures when the economy picks up.
The recent introduction of the Singapore Exchange’s SPACs listing framework is a positive step towards attracting fast-growing companies here. Singapore will need to continue to support unicorns to thrive, as this will not only add vibrance to the entrepreneurial ecosystem but also bring benefits to the economy,” KPMG said.
Other recommendations includes:
Financial support measures to relieve immediate cash flow issues for businesses
Enhance M&A support schemes to help local enterprises grow and expand