Singapore Budget 2023

We face a rapidly changing and challenging world. Geopolitical power play dividing the East and West. Economic resilience, access to supplies and security overshadowing cost advantages in supply chain planning. Global imbalance in supply and demand keeping both global and local inflation at prohibitive rates. In the backdrop, global roll-out of the 15% minimum tax under the Base Erosion and Profit Shifting (BEPS) initiative is underway.

Singapore, as a small nation, cannot stop the waves of change. Yet it must learn to ride them by swiftly adapting itself to stay relevant. In this Budget, the Government continues to focus on building capabilities in local enterprises and the workforce as well as strengthening the social compact. As American author Marilyn Ferguson said, “Transformation is a journey without a final destination.”

Despite the tight budgetary position, the Valentine’s Day handouts to Singaporeans are generous. Measures are put in place to help lower- to middle-income families cope with the immediate challenges of higher costs of living.

Further refinements are made to craft a more progressive tax system. Tax increases are aimed at luxury cars, tobacco and higher-end properties. Personal relief for working mothers will be based on fixed quantum (instead of a percentage of the working mother’s earned income), granting higher relief to lower- to middle-income mothers while capping the claim for those in the higher-income groups.

Singapore has also decisively announced that it will implement the Pillar 2 Global Anti-Base Erosion rules under the BEPS 2.0 project and Domestic Top-up Tax for large multinational enterprises from the financial year starting on or after 1 January 2025.

In summary, Budget 2023 focuses on three thrusts, namely:

1. Growing the economy and equipping workers

Singapore plans to renew its efforts to attract high-quality investments in growth sectors, including banking and finance, global trading and manufacturing in key segments such as electronics, chemicals, and biomedical science. The National Productivity Fund will be topped up by S$4bn to support investment in capability building, enhancing domestic ecosystems and upskilling the workforce. In the new Enterprise Innovation Scheme, a super deduction of 400% will be granted on qualifying expenses incurred on R&D conducted in Singapore, registration and acquisition of intellectual property rights, and training. Significant funds will be set aside for investing into developing local enterprises. Financing schemes and energy efficient grants will be extended to help local enterprises deal with cost pressures.

Jobs-skills integrators will be appointed to identify manpower and skills gap in selected sectors, ensuring better job fit and translating into better employment and earning prospects for workers. Various employment credits will be extended or introduced to encourage diversity and inclusivity in hiring.

2. Strengthening the social compact

Significant resources will be invested in three key areas: strengthening families, tackling inequality and enhancing social mobility, and providing better care for the ageing population.

To support families, housing subsidies will be enhanced for first-timer applicants. Cash grants, subsidies and personal reliefs will be granted to defray the costs of raising children. Separately, the Government will work with employers to put in place certain guidelines for flexible work arrangements and will double the government-paid paternity leave from two weeks to four weeks for eligible fathers of Singaporean children born on or after 1 January 2024.

To ensure there are sufficient retirement funds, Central Provident Fund (CPF) will be made mandatory for platform workers. CPF contribution rates will be enhanced for senior workers and the CPF monthly salary ceiling will increase in steps from S$6,000 to S$8,000 by 2026. Significant top-ups will be made to fund long-term care and health care needs.

3. Building a resilient nation

For crisis management, a more comprehensive system will be put in place to train, mobilise and cross-deploy public servants based on their skillsets and expertise. The Government will augment its resources by tapping into the capabilities of the private and people sectors in responding to future crisis.

To build up economic and supply chain resilience, the Government will continue to diversify and improve its import sources, review its stockpiling strategies and develop local production capabilities for critical supplies. Future buildings will be designed to serve multiple purposes, which can be converted into essential facilities during crisis.

Active steps are taken to meet the net-zero emission target by 2050 by reducing energy usage and transiting to cleaner energy sources. Steps are also taken to deal with rising sea level by investing in coastal and drainage infrastructures.

All in all, Budget 2023 is an expansionary one. Government spending is expected to increase over the years, and this will need to be funded by an increase in collection. There was no announcement this year on personal tax rate increase, capital gains tax, death tax or the like. However, it is clear that the Government will stay its course towards a more progressive tax system — that those who are doing well should contribute more to building the community and the nation, and pay more in taxes based on their lifestyle choices.

In the Minister’s closing words, we need to move forward in the new era as one united people, not only doing the best for ourselves but also helping fellow Singaporeans.