Singapore Budget 2023
On February 14, 2023, Lawrence Wong, Singapore’s Deputy Prime Minister and Finance Minister, presented the country’s second budget speech. The budget aims to address challenges faced by the future economy through three key drivers: growing the economy, strengthening the social pact, and improving resilience. Among the other measures, the budget introduces a new business innovation program to support innovation across the economy, improves support for parents and future parents, and addresses climate change.
On February 14, 2023, Deputy Prime Minister and Finance Minister, Lawrence Wong, delivered his second budget speech.
The Minister began by saying Singapore’s economic fundamentals remain strong despite slower economic growth this year. However, he warned of significant uncertainties and downside risks to this year’s forecasts, such as the impact of a decline in the US and EU economies, an escalation of the war in Ukraine, and the possible emergence of a new variant COVID-19.
The 2023 budget has identified three key drivers to address the challenges of the future economy:
- Grow the economy
- Strengthen the social pact
- Improve resilience
Budget 2023 introduces a new business innovation program to support pervasive innovation across the economy, increasing tax credits to 400% of eligible spending for select qualified businesses. In addition, companies that have yet to become profitable or do not have sufficient profits to maximize the benefits of tax credits can now convert 20% of their total eligible expenditure per assessment year (YA) into a cash payment, subject to a limit of $20,000. This will help small businesses offset the costs of their innovation activities, even if they pay little or no taxes. Among other changes, the Enterprise Innovation Scheme, the SME Co-Investment Fund, and the Singapore Global Enterprises initiative are just a few examples demonstrating the Government’s emphasis on the need for local entities to innovate and grow to compete and survive in the economy of the future.
The 2023 budget aims to help cope with price hikes caused by an unpleasant cocktail of rising inflation and GST increases. The Minister announced improvements to the GSTV Standing Scheme and Guarantee Package and further one-off support measures under the Guarantee Package to address immediate cost-of-living issues. However, the Minister warns that rising inflation will stay. The best way to deal with it is to become more productive and competitive so that real wages increase. As a result, Singapore will have to continue with its economic transformation and restructuring.
This budget will support parents and future parents. To provide more significant support for eligible low- and middle-income working mothers, the working mother’s child benefit will be changed from a percentage of the mother’s earned income to a flat dollar benefit starting in the 2025 school year. With the cash bonus gift for children, increased government contributions to the Child Development Account, flexible work arrangements for working parents, and increased unpaid childcare leave, the Government is sending a strong message to encourage people to start a family and raise more children.
Climate change remains high on Singapore’s agenda. Building on his earlier announcement that Singapore would establish a Coastal Zone and Flood Protection Fund, the Minister said Singapore would continue to commit more resources as Singapore progressively implements the extensive infrastructure plans to protect our coastline from rising sea levels.
The 2023 Budget announces further adjustments to the tax system, including higher marginal rates of stamp duty on the buyer for residential and higher value non-residential properties, a cap on preferential additional registration tax rebates at $60,000 to avoid over-rebating more expensive cars when they are written off, and a 15 percent increase in the tobacco excise tax.
On the international front, Singapore has announced plans to implement measures in 2025 as part of a broader international effort to align global minimum corporate tax rates for large multinational enterprise groups, as well as a national top-up tax, which will raise the effective tax rate for multinational groups in Singapore to 15%