SINGAPORE BUDGET 2023
Budget 2023 was announced when economies around the world had emerged from the COVID-19 pandemic, and Singapore has lifted most COVID-19 restrictions. Delivered by the Deputy Prime Minister and Minister for Finance Mr. Lawrence Wong on 14 February 2023, Budget 2023 charts the way forward, and addresses the pressing concerns of Singaporeans as the country moves ahead in challenging geopolitical and global economic circumstances.
Despite the various issues confronting the nation, the DPM and Minister for Finance began by sharing that Singapore can expect positive but slower economic growth this year, and the reassurance that Singapore’s economic fundamentals remain strong. By building on sound macroeconomic and prudent fiscal policies, Singapore will be better position for future challenges.
The theme, “Moving Forward in a New Era”, unveiled a slew of programmes designed to help Singaporeans to adjust to the rising cost of living, grow the economy, equip workers with new skills, strengthen our social compact and at the same time to reposition Singapore’s resilience for a new era.
To continue to nurture and sustain innovation across the economy, a new Enterprise Innovation Scheme is introduced to allow tax deductions of up to 400% of qualifying expenditure for certain qualifying activities. For businesses that have yet to become profitable or do not have sufficient profits to maximise the benefits of the tax deductions, they will be able to convert 20% of their total qualifying expenditure per year of assessment into a non-taxable cash payout, subject to a cap of $20,000. This will assist SMEs in offsetting the cost of their innovation activities, even if they pay little or no taxes. Among other changes, the Enterprise Innovation Scheme, SME Co-Investment Fund, and the Singapore Global Enterprises initiative are just some of the measures taken by the Government to assist local companies to innovate and grow in order to compete and survive in the future economy.
On the social front, to help Singaporeans cope with rising inflation and GST increase, the DPM and Minister for Finance has also announced further enhancements to the permanent GSTV scheme and Assurance Package as well as an additional one-time support measure under the Assurance Package to address the issues over the high cost of living.
For young families and soon-to-be parents, more support has been identified for eligible lower-to-middle working mothers. The Working Mother’s Child Relief will be changed from a percentage of the mother’s earned income to a fixed dollar relief from Year of Assessment 2025. This is in conjunction with the Baby Bonus Cash Gift, increased Government contributions to the Child Development Account, flexible work arrangements for working parents, double Government-Paid Paternity Leave and increase Unpaid Infant Care Leave. These initiatives are designed to encourage young Singaporeans to start families and raise more children.
Another key initiative announced in Budget 2023 was the raise in the CPF monthly salary ceiling from $6,000 to $8,000 by 2026. This change will be implemented progressively over four years from 2023 to 2026 so that employers and employees can adjust to the increase comfortably. The last change took place in 2016 where it was adjusted from $5,000 to $6,000 in order to keep pace with wage growth. While this is aimed to help middle-income Singaporeans save more for their retirement and have more funding for their housing needs, it would also mean that they will have less net disposal income. The increase in employer’s contribution rate will also impact businesses with additional cost.
In view of the slew of initiatives announced towards the building of a more inclusive society, DPM and Minister for Finance also cautioned that in an era of high inflation, it is not fiscally sustainable to rely heavily on Government support year after year.
As the country seeks to balance the short-term needs of the population and businesses with a longer plan for its transformation, Budget 2023 also announced further adjustments to the tax system. This includes imposing a higher marginal Buyer Stamp Duty rate for higher-value residential and non-residential properties, a cap on the Preferential Additional Registration Fee rebates at $60,000 for more expensive cars when they are deregistered and a 15% increase in tobacco excise duty. These tweaks are intended to seek broader revenue streams as Singapore cannot rely narrowly on any one major tax type to fund the country’s projected future increases in Government expenditure. For our tax system to remain resilient, amid global developments, a safer and more sensible strategy is to rely on a good mix of taxes on income, assets, and consumption. It will also make the country’s tax system fairer, more progressive and sustainable. More importantly, these initiatives also cement the philosophical foundation for future policies that those who are better off should contribute more and bear a higher fiscal burden.
On the international front, there are plans for Singapore to implement the global minimum effective tax rate of 15% for affected large multinational enterprises in 2025 as part of a broader international effort to align the global minimum effective tax rate for affected large multinational enterprises. This is in line with Pillar 2 Global Anti-Base Erosion rules of the Base Erosion and Profit Shifting 2.0 initiative. Following this decision, the Government will review and update the broader suite of tax schemes and incentives in order to maintain Singapore’s competitiveness in attracting and retaining investments.
Budget 2023 is about building capabilities and seizing opportunities in a new era marked by uncertainty and volatility. As the world enters an era of “zero sum thinking”, Singapore cannot assume that it will stay successful by doing the same things as in the past. We will need to adjust to the challenges of this new era, reposition our economy and refresh our social compact for the future.
The future is in the hands of all Singaporeans. We have to chart the course and determine exactly what the “new era’ will be.
20 February 2023
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