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High interest rates sap innovation investment: UN

High interest rates hinder innovation funding. R&D surges in AI and biotech, but global venture capital drops 40%. Economic challenges endanger future innovation. Global innovation diversifies; China rises in ranking. Africa resilient in VC funding.

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12 months ago

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GENEVA, SWITZERLAND — Funding of innovation is becoming increasingly uncertain, with high interest rates taking a toll on the amounts venture capitalists are willing and able to dish out, the UN said Wednesday.

In a fresh report, the UN’s World Intellectual Property Organization (WIPO) found that 2022 was marked by swelling government and company spending on research and development, especially in areas like artificial intelligence and biotech.

But at the same time, the global value of the venture capital (VC) funding that helps transform ideas and inspiration into products and services plunged 40 percent, and is continuing to fall.

“There has been a drop in the investment environment,” WIPO chief Daren Tang told reporters in a virtual briefing.

“Venture capital funding is becoming more and more scarce.”

The drop last year came after a dramatic surge in such funding in 2021, as the pandemic spurred spending in new areas and in regions that do not usually receive a large share of such investments.

But the funding levels have not just evened out. Sacha Wunsch-Vincent, co-author of the report, said the decline had continued, with a 47-percent drop seen in the first half of 2023 compared to 2022.

“This is only the tip of the iceberg,” he told reporters.

‘End of cheap money’

Pointing to “a harsher investment conditions”, including slow economic recoveries and geopolitical tensions, he warned the current high interest rates especially “endanger the future of innovation”.

“Borrowing isn’t free anymore. It’s really the end of cheap money.”

At the same time, WIPO stressed that the picture for innovation was mixed, with 2022 also marked by a significant rise in R&D spending by corporations, to a record high of $1.1 trillion.

And preliminary data indicated that global government R&D budgets increased in real terms last year.

Patents also continued to rise, and while the value of VC funding dropped, the number of VC deals actually swelled, the report showed.

That boom was fuelled in part by activities in the field of artificial intelligence, Wunsch-Vincent said.

Information communication technology companies “were already spending a lot of money, … but are now almost in an arms race for more spending on AI”, he said, also highlighting spending in pharma, biotech and construction.

A number of sectors that cut spending during the pandemic had meanwhile seen spending bounce back, including automobiles.

‘More diverse’

Wednesday’s report also comprised the UN agency’s annual ranking of the world’s most innovative countries, with Switzerland topping the list for the 13th year running.

But the Global Innovation Index 2023 showed that the innovation economy, long heavily concentrated in North America and Western Europe, is diversifying.

“It is getting more diverse, there are more engines of innovation around the world,” Tang said.

The top 10 list still includes mainly Western countries, with the exception of Singapore in fifth position, and South Korea in tenth.

The United States slipped to third position, with Sweden now in second, and Britain remaining in fourth.

China meanwhile dipped slightly from 11th to 12th place, but from 35th a decade ago.

China figures among the middle-income countries that have climbed the ranking the fastest in the past decade, alongside the likes of Turkey, India and Iran.

Since the pandemic started four years ago, Mauritius, Indonesia, Saudi Arabia, Brazil and Pakistan have meanwhile risen most, WIPO said.

While the value of VC funding shrank last year, Wunsch-Vincent meanwhile said it was positive that the investments remained spread out geographically, and had not shrunk back to simply focus on the traditional centres of innovation.

Africa was the only region that did not see a decline in the value of VC funding last year, he said.

— AFP

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Economy

IRAS reports S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year

The Inland Revenue Authority of Singapore (IRAS) collected S$80.3 billion in tax revenue for FY2023/24, a 17% increase from the previous year. The rise reflects strong corporate earnings, higher wages, and increased consumer spending, contributing to essential services and economic development.

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2 weeks ago

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4 September 2024

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The Inland Revenue Authority of Singapore (IRAS) reported a total tax revenue collection of S$80.3 billion for the Financial Year (FY) 2023/24, marking a 17% increase from FY2022/23.

The rise is attributed to the country’s strong economic growth and nominal wage increases in 2022.

This revenue constitutes approximately 77.6% of the Singapore Government’s Operating Revenue and 11.9% of the nation’s Gross Domestic Product (GDP). The taxes collected will be used to fund essential services, support social development programmes, grow the economy, and enhance Singapore’s living environment.

In addition to tax collection, IRAS processed close to S$2.3 billion in enterprise grants, benefiting over 131,000 businesses and workers. The arrears rate for Income Tax, Goods and Services Tax (GST), and Property Tax remained low at 0.64%.

Breakdown of Tax Revenue

Corporate Income Tax (CIT) showed the largest increase, rising by 25.6% from S$23.1 billion in FY2022 to S$29.0 billion in FY2023, due to strong corporate earnings. CIT accounted for 36.1% of total revenue collection.

Individual Income Tax (IIT) accounted for 21.8% of the total, with revenue increasing by S$2 billion to S$17.5 billion, driven by higher wages and an increase in the number of taxpayers.

GST contributed 20.7% of the total revenue, with collections rising by S$2.6 billion to S$16.6 billion, a result of higher consumer spending and the increase in the GST rate.

Property Tax contributed 7.4% (S$5.9 billion), and Stamp Duty accounted for 7.2% (S$5.8 billion), though Stamp Duty saw a decline of S$0.1 billion due to lower property transaction volumes.

S$2.3 Billion in Enterprise Grants Processed

IRAS also disbursed S$2.3 billion in grants to support businesses and workers under several schemes, including the Progressive Wage Credit Scheme (PWCS), Senior Employment Credit (SEC), and Jobs Growth Incentive (JGI). These grants were designed to assist businesses in maintaining operations and supporting workers’ employment.

Digital Solutions for Businesses

IRAS continues to enhance digital solutions to facilitate tax compliance for businesses.

Initiatives include:

  • InvoiceNow: This e-invoicing system, set to become mandatory for GST-registered businesses starting in November 2025 for new GST registrants, allows for seamless transmission of invoice data to IRAS for tax administration.
  • One-Stop Payroll (OSP): Developed in collaboration with the Central Provident Fund Board, Ministry of Manpower, and GovTech, this system allows businesses to submit wage-related information to various agencies through a single platform. These initiatives build on IRAS’ existing digital services, such as the Submission of Employment Income API.

To date, over 120 software providers have partnered with IRAS, offering 46 software products designed to simplify tax filing and payments for businesses.

In FY2023/24, it audited and investigated 9,590 cases, recovering approximately S$857 million in taxes and penalties from non-compliant taxpayers.

IRAS aims to ensure timely tax filing and payment while addressing tax avoidance and evasion.

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Economy

Singapore faces 25% increase in bankruptcy filings during first half of 2024

Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 filings—a 25% increase from 2023. The number of undischarged bankrupts reached 9,903, reflecting ongoing financial challenges and highlighting a rise in bankruptcy orders and applications.

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2 weeks ago

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2 September 2024

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Singapore faces 25% increase in bankruptcy filings during first half of 2024
(photo for illustration purposes only/Unsplash)

SINGAPORE: Bankruptcy cases in Singapore surged in the first half of 2024, with 2,334 individuals filing for bankruptcy—a 25% increase compared to the same period in 2023, according to data from the Ministry of Law (MinLaw).

The rise in filings highlights the ongoing financial challenges faced by many in the country.

The total number of undischarged bankrupts reached 9,903 as of 30 June, marking a 2.4% increase since January.

Additionally, 594 individuals were declared bankrupt between January and June 2024, an 11% rise from the previous year.

May recorded the highest number of bankruptcy applications, with 430 cases, followed by January with 409.

In comparison, May 2023 saw 314 applications, while the highest figure for the first half of 2023 was 356 in March.

Bankruptcy orders also increased, with 595 orders issued in the first half of 2024, compared to 537 during the same period in 2023.

Under Singapore law, individuals with at least S$15,000 (US$11,480) in unpaid debts can file for bankruptcy in the High Court.

The process requires a deposit of S$1,850 (US$1,415) to the Official Assignee for the administration of the bankrupt’s estate.

However, this deposit is non-refundable for those filing for their own bankruptcy. Creditors may recover the deposit if sufficient funds are available in the bankrupt’s estate.

Some cases may qualify for the Debt Repayment Scheme (DRS), an alternative to bankruptcy designed to help debtors repay their debts without filing for insolvency.

The DRS is accessible only through creditors and is available to employed individuals with debts of up to S$150,000 (US$114,807).

Those who qualify must repay their debts in monthly installments over up to five years.

Credit Counselling Singapore (CCS) general manager Tan Huey Min noted that borrowers under the DRS typically repay less than the full amount owed, but once they fulfill their obligations, they can start afresh.

MinLaw cautioned, however, that there is no guarantee of significant debt reduction, and any reduction above 70% would be considered substantial.

Despite the lighter debt burden under the DRS, some individuals still fail to complete their repayment plans.

In such cases, creditors can pursue the remaining debt, which may include filing another bankruptcy application.

Additionally, not all debtors qualify for the DRS, and those deemed unsuitable are declared bankrupt.

Recent reforms in Singapore’s bankruptcy system aim to rehabilitate debtors with clearer discharge timelines

In an interview with Straits Times, Yuen Law associate director Tris Xavier highlighted that prior to 2016, the system lacked clear timelines for discharge from bankruptcy, with some individuals remaining in this state for decades.

The reforms now offer clearer milestones for debtors based on their personal circumstances, making the system more debtor-centric.

First-time bankrupts can be discharged within three to seven years if they meet their target contributions, which typically require 52 monthly payments.

Repeat bankrupts can be discharged within five to nine years, contingent on 76 monthly payments.

Those who fully meet their target contributions will have their names removed from public records five years after discharge, while those who do not will remain on public records permanently.

Xavier emphasized that bankruptcy should not be seen as a way to reduce debt but rather as a financial rehabilitation tool.

He warned against hiding assets, explaining that bankruptcy laws cover both local and overseas assets, and the court can reverse transactions intended to shield assets from creditors.

While CPF savings are protected from creditors during bankruptcy, CPF funds inherited by a bankrupt after death are not.

Additionally, bankrupts face restrictions, including needing permission to travel overseas and being barred from managing a business or acting as a company director.

For those in financial distress, bankruptcy is not the only option.

Xavier advised debtors to communicate openly with creditors as soon as financial difficulties arise.

Credit Counselling Singapore (CCS) also offers a Debt Management Programme that negotiates more affordable repayment terms with creditors.

Unlike the DRS, the CCS program requires full repayment of debts, but it allows individuals to avoid bankruptcy, keeping their financial situation private.

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