Benefiting as others benefit

A scheme that provides tax incentives for firms to become more efficient has also become a money-spinner for corporate trainers and other companies that promote the programme's benefits.

The Productivity and Innovation Credit (PIC) scheme gives tax breaks when investments are made to lift productivity, but understanding the finer details can be daunting.

That has prompted training firms to offer courses for bosses, while some companies are trying to win business by telling customers that they might qualify for PIC rebates.

Mr Andy Ng, founder of training company Asia Coaching Training, runs weekly seminars to educate bosses of small and medium-sized enterprises about the help they can get under the PIC scheme.

Mr Ng has been running 21/2-hour seminars on the PIC scheme once a week since February last year. They cost about $50 per person, with two to five people attending each time.

The PIC scheme was introduced in 2010 and provides a range of tax incentives to help businesses improve productivity and innovation. But many bosses remain unsure of what it can do for them.

"There are actually many things that companies can claim for, like buying computers, internal training, purchasing tech products as incentives for staff... People should be aware of the things they can claim, to maximise the benefits they can receive under the PIC," said Mr Ng, who set up his company in 2001.

He added that his clients prefer receiving guidance from him to consulting government websites as he "customises (his) advice to their industry and their needs".

"When I tell people how best to take advantage of this generous scheme, some people have said my suggestions are on the verge of being illegal... But I'm not teaching people to go beyond the parameters," he said.

Companies have also found that their business improves when they tell clients that their services are covered under the scheme.

The benefits include a 400 per cent tax deduction on productivity investments and a dollar-for- dollar matching cash bonus of up to $15,000 over three years for businesses that spend at least $5,000 a year on those efforts.

Mr Alfred Ang, chief technology officer of OSWeb2Design Singapore, which provides e-commerce software and mobile applications, said the PIC scheme helps to convince customers who might be worried about the cost of his company's services.

"If they can recoup the cost from the PIC, they will be more willing to invest," he said, adding that mobile apps "are expensive and might cost more than $5,000".

The company has put up details of the PIC scheme on its website and has received "numerous queries" about it.

In 2011, $390 million in cash payouts and tax savings were awarded to 32,000 companies under the PIC scheme, said the Inland Revenue Authority of Singapore (Iras), which administers the scheme.

As of Jan 31 this year, about 57 per cent or 34,000 of active companies - those with at least one employee who is not a shareholder - that have filed their tax returns for last year have claimed cash payouts or tax deductions under the PIC scheme.

Mr Ng said he does not advise companies on how they should use their tax benefits.

"I show them how they can get money for their business, but I don't tell them how to use it... I only let them know that the best thing would be to use it to grow the business," he said.

Iras said companies are encouraged to use their PIC tax credits for productivity-enhancing investments "in order to remain competitive in the long run".

It also warned firms about making false claims. "We take a serious view of any attempt by PIC claimants, vendors or consultants to artificially inflate the value of the PIC expenditure or investment, purely to abuse the PIC scheme. We will not hesitate to take action against the offenders, including bringing them to court," it said.

Mr Harvey Koenig, tax partner at KPMG Singapore, said the criteria for claiming PIC benefits are "not generally stringent", but businesses should be aware of the requirements, and maintain the appropriate documentation to back up their claims.

Schemes like the PIC are "an opportunity for businesses to think about making serious investments to embark on value-creation activities", he added.

"The benefits provided by the PIC should be seen as a means to an end, and not merely as subsidies for funding existing operations," he said.

chiaym@sph.com.sg

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