SINGAPORE – Offering incentives for early-stage investments into climate tech solutions, and schemes to refine capital risk charge with respect to green finance could help strengthen Singapore’s global relevance in sustainability, the digital economy and international trade, PwC said in its wishlist for Budget 2023.
Encouraging climate tech breakthroughs will not only facilitate Singapore’s green ambitions, it will also position the Republic as a sustainability innovation hub, said the professional services firm.
At the same time, Singapore has the potential to position itself as an environmental, social and governance (ESG) arbitration centre to resolve emerging environmental disputes, PwC said. This is in view of the potential rise in demand for carbon trading dispute arbitration, as more businesses decarbonise.
On digital risks, PwC suggested encouraging joint investments by industry clusters to help companies “protect and defend” at scale, even if some businesses are more robust than others in their risk modelling and readiness.
“A digitally risk-resilient economy can generate the investor confidence Singapore needs to thrive in today’s mercurial climate,” said Kwek So Cheer, digital solutions leader at PwC Singapore.
The firm also asked the government to consider removing traders of digital payment tokens (DPTs) from the prescribed list of businesses that are subject to input tax restrictions. It noted that businesses should not be subject to additional goods and services tax (GST) if they choose to trade in DPTs, something that traders of other financial instruments are not subject to.
“Whether a business chooses to trade in DPTs or other types of investments should not result in a different GST outcome,” said Kor Bing Keong, GST leader at PwC. “Removing traders of DPTs from the prescribed list of businesses that are subject to input tax restrictions is in line with the GST position in countries such as the UK, Australia and New Zealand.”
Overall, providing certainty for non-taxation of carried interest if certain developmental criteria are met would help to enhance Singapore’s competitiveness, according to PwC.
With tax incentives no longer effective for multinational enterprises (MNEs) due to the introduction of the Base Erosion and Profit Shifting initiative, PwC said it hopes the government can expand the scope of grants to support MNEs in building substance in Singapore and reconsider the eligibility criteria and grant quantum for some of the existing grant schemes.
Meanwhile, the government can start outlining its ideas on how Singapore’s exporters should be protected from the impact of the Carbon Border Adjustment Mechanism (CBAM) set to be introduced in the European Union and potentially other countries that may follow the bloc’s footsteps.
The objective of the CBAM is to levy an import tax on products where the production was not subject to the same environmental standards as those in the country of import, helping to level the playing field for industries that already have to pay for the pollution they emit.
To avoid these taxes, SIngapore exporters would need to demonstrate that their production processes in Singapore or imported materials meet the required environmental standards.
PwC said the government ought to consider setting its own production standards based on environmental objectives and targets, as well as CBAM for products imported into Singapore that do not meet such standards.
Turning to the talent crunch, PwC said businesses need to be encouraged to rethink their workforce strategy as well as redesign tasks and responsibilities to better align roles with the changing environment.
There is also a need to invest in upskilling programmes for employees that also touch on interpersonal and non-technical skills, such as problem solving, creative thinking, innovation and emotional intelligence, to navigate increasing complexities.
“Coupled with the lack of confidence workers can have towards their organisations, as reflected in the recent ‘great resignation’ and ‘quiet quitting’ phenomena, there is a clear need for sophisticated people-centred leader capabilities across the board to bridge the trust gap between employees and employers,” PwC said. THE BUSINESS TIMES