As countries are confronted by growing geopolitical uncertainty and economic volatility, vision, innovation and resilient growth will become key to thriving in the fast-evolving business landscape. This year’s Budget introduces key measures aimed at repositioning its economy and bolstering its fiscal measures.
Read on to find out how Singapore can leverage new pathways of growth to unlock and seize new opportunities.
New year, new tax hike. Singaporeans are prepared to pay more with the two-stage goods and services (GST) tax hike: first from 7% to 8% on 1 January 2023, followed by 8% to 9% the following year. A “necessary evil” to cover future spending, amid increases in healthcare expenditure, security and other social needs, the recent GST rate increase has impacted many already grappling with the rising costs of living.
To help the nation cope with inflation and cushion the impact of higher GST, DPM Wong proposed higher cash payouts under the Goods and Services Tax Voucher (GSTV) scheme and Assurance Package.
Under the GSTV scheme, those residing in homes with annual values of $13,000 and below will receive $700 in 2023 — up from $500. Those with homes of annual values above $13,000 up to $21,000 will receive $350 in 2023 — $100 more than before.
The Assurance Package, first introduced in 2020, will also be topped up by $3 billion. Under the enhanced package, eligible Singaporeans will receive an additional cash pay-out of between $300 and $650 bringing the total amount received by each adult Singaporean to between $700 and $2,250 over five years.
To help businesses weather tighter financial challenges, the Government will roll out immediate support amid inflation and high interest rates.
The current Enterprise Financing Scheme, which allows local enterprises to access financing more readily, will be extended till 31 March 2024 to facilitate local enterprises’ access to credit. The enhancements include support for domestic construction projects via project loans, as well as a 70% government risk-share to help SMEs obtain trade loans.
The Energy Efficiency Grant will also be extended till 31 March 2024, providing continued support for businesses in the food services, food manufacturing and retail sectors to invest in energy efficiency. This will reduce the impact of higher electricity prices, DPM Wong shared.
Under the new Enterprise Innovation Businesses that make full use of the scheme can enjoy tax savings of nearly 70% of their investment. Meanwhile, start-ups, small and medium-sized enterprises (SMEs) and other smaller businesses that have yet to turn profitable can opt to convert 20% of their total qualifying expenditure across the five categories per year of assessment into a cash pay-out of up to $20,000.
With BEPS 2.0 on the horizon, plans are underway to implement a domestic top-up tax for large multinational enterprises (MNEs) in Singapore from 2025. A global minimum effective tax rate of 15% will also be introduced for large Singapore MNEs amid a broader international move to increase transparency in the tax environment.
These developments follow DPM Wong’s announcement in Budget 2022 that Singapore was exploring a top-up tax in response to changes in international tax rules. He shared in his Budget 2023 Statement that the rules will be implemented progressively, with their full effects to be felt in 2025 or later.
With less scope to use tax incentives to attract new investments, the Government will review and update a broader suite of industry development schemes to stay competitive. It will also focus on building capabilities in growth sectors where it can be highly competitive, such as finance, transportation and logistics, electronics, chemicals and biomedical science.
Measures to boost the nation’s productivity and workforce quality, while maintaining our reputation as a robust and resilient financial centre, will further help to cement the nation’s competitiveness on the world stage.
