By Robin Chan

MS SHARON Tan, in her 40s, is the tax director of Infineon Technologies Asia-Pacific, a German-based semi-conductor maker with manufacturing and research and development (R&D) facilities here. Singapore's electronics manufacturing sector has been hit hard by a fall in global demand.

WHAT SHE WANTS

'To help multinational corporations (MNCs) defray business costs, a temporary rebate of, say 10 or 20 per cent, off payable tax would be helpful - it's an immediate cash cost-saving which can then be channelled to other areas.

'Letting companies monetise their current-year tax losses, instead of carrying them forward, would provide immediate cash-flow relief and really help businesses stay afloat in such challenging times.

'Removing restrictions that prevent certain R&D service providers from receiving additional tax benefits would also help MNCs. Even during these tough times, R&D efforts should not be neglected in order for the company to stay competitive.

'Currently, those earning a fee from the parent company for performing R&D cannot claim the tax benefit (of an extra 50 per cent in tax deduction on R&D done in Singapore), so there is no additional incentive for MNCs to park their R&D efforts locally.'

WHAT EXPERTS SAY

In terms of tax breaks for companies, most experts expect a reduction in the headline corporate tax rate, currently set at 18 per cent - which is higher than Hong Kong's 16.5 per cent.

But some, including DBS economist Irvin Seah, argue that reducing the tax rate will have a permanent effect on the official coffers, which need every cent of revenue they can get.

'Unless we are ready for another GST hike to balance things out, cuts in corporate tax will be a costly exercise,' Mr Seah says.

Instead, he and other economists are leaning towards one-off measures such as a partial waiver of profits tax, property tax and corporate tax, rather than a reduction in the tax rate.

Another long-standing bugbear of MNCs is foreign-sourced income, which is taxed here but not in Hong Kong or Malaysia. Lifting this tax, whether temporarily or for good, would be a great boon to firms with global operations, say experts.

Tax firms also suggest allowing loss-making companies to 'carry back' more losses to offset against taxable income for previous years, reducing the total amount of tax they have to pay and providing immediate cash-flow help.

This article was first published in The Straits Times on January 17, 2009.