Singapore, long crowned a champion of economic competitiveness, finds itself at a pivotal juncture. Though its reign remains strong, the landscape shifts, demanding not just survival, but ascending in the new reality.
Adversity whispers in the winds of change, threatening to erode previous comforts. However, Singapore carries within its DNA the tools for transformation. Its established reputation as a haven for business, coupled with the impending global tax overhaul, presents a golden opportunity. By strategically reshaping its tax system, Singapore can attract diverse investments, fostering a fertile ground for enterprises to bloom.
Beyond bricks and mortar, Singapore's ascent hinges on its human capital. Its world-class talent pool equips the nation to excel in the knowledge-driven, environmentally conscious era. Moreover, taking the lead in climate stewardship holds immense potential. Championing sustainable solutions not only secures prosperity for all but also grants Singapore a prominent presence on the international stage.
The journey ahead will be paved with challenges, but Singapore's spirit remains undaunted. Like a beacon amidst uncertainties, this year's Budget shines brightly, sharpening the nation's value proposition and future-proofing its economy, businesses, and people. It is a testament to the collective will, an assurance that Singapore, is poised to continue ascending in the new reality, will not merely weather the storm, but emerge stronger, brighter, and ever the economic force it is known to be to make the difference.
The announcement of a 50 percent corporate income tax rebate reflects the government's acute commitment to support enterprises in the current economic landscape. The decision to set the rebate cap at S$40,000 - the highest in a decade - and minimum cash payout of S$2000 further emphasises this commitment to bolstering smaller businesses.
Singapore's newly introduced Refundable Investment Credit serves as a strategic solution to the challenges faced by multinational enterprises due to the global minimum tax rate of 15 percent. This will enable Singapore to remain competitive amidst global competition for investments. While we await details of the Refundable Investment Credit scheme, it is expected that the scheme will be designed to meet the requirements of a Qualified Refundable Tax Credit scheme under the BEPS 2.0 Pillar Two rules. This provides for a more favourable treatment of such tax credit schemes compared to other forms of tax incentives, which will help mitigate the impact under the Pillar Two rules that many multinational groups have been very concerned with.
The decarbonisation of the energy sector gets a big leg up with creation of the S$5.0 bn Future Energy Fund. By channelling this fund to strengthen critical energy infrastructure for clean carbon solutions such as geo-thermal, small modular nuclear and imported renewable energy, we are preparing ourselves to transition away from a fossil fuel based economy to a low carbon future. This bodes well for companies focussed on clean energy solutions and can help catalyse a new eco-system in the coming years.
The Refundable Investment Credit (RIC) has the potential to be a key tool in attracting fresh investments, particularly now that concessionary tax rates below 15 percent are no longer as attractive in a BEPS Pillar Two world. However, with the focus being on new investments, one key question is whether the RIC retains existing multinational enterprises with significant presence in Singapore.
The bandwidth increase for the broadband network continues to reinforce Singapore’s position as a leading Tech hub. New technologies, the rapid move and adoption of AI in all aspects of life, work, education, personal will all benefit from this. The increasing consumption of short videos and rich media content requires consistently higher bandwidth for all households as streaming content is the norm. This will also further improve the ability to remotely do more from Singapore to the rest of the world.
AI is slated to be the new engine of growth which is why the Singapore government is investing S$1 billion in positioning Singapore as a Global Centre of Competency for AI. This timely and strategic move will develop AI talent and fuel AI-led growth that will propel Singapore into the future.
Given that the residential property rental market has increased significantly since the pandemic, the annual value of residential properties has also increased in tandem, putting a strain on certain segments of society – especially retirees who are asset rich but do not have the cashflow to meet their increased property tax burden. The 24-month interest free instalment plan is therefore a welcome measure that temporarily elevates the cashflow burden of these retirees.
However, the underlying root cause remains unaddressed in that property tax is a wealth tax imposed on the ownership of immovable properties. This impacts those who are asset rich or wealthy who may not have the cashflow or income to foot the increased property tax bill on their own, unless their illiquid property assets are liquidated.
Personally, I am excited about the AI Centres of Excellence that will drive collaboration and innovation, which will set Singapore apart amidst an increasingly competitive business landscape. This focus will support organisations to truly harness the benefits of existing talent within Singapore, supported by leading-edge AI capabilities, driving value to the business and creating new opportunities for growth.
Rising business costs and softening economic growth are the key concerns affecting Singapore's businesses. Some of these cost drivers may persist in the long term and affect Singapore’s economic competitiveness. The balancing act of improving the livelihood of lower-income workers to strengthen our social compact, while keeping employers’ operating costs manageable, is never an easy task. With the enhancement to the Progressive Wage Credit Scheme (PWCSS), local enterprises can confidently raise the salaries of their lower-income workers while continuing to remain competitive.
The unveiling of the Refundable Investment Credit scheme, coupled with increased investments in R&D, AI, and SkillsFuture as announced today, will significantly boost Singapore's appeal as a hub for businesses. The Enterprise Innovation Scheme further solidifies Singapore’s attraction. These initiatives are set to inspire confidence among companies to anchor and expand their high-value economic activities in Singapore, particularly in light of the rapidly evolving and dynamic macroeconomic landscape.
The increase in income threshold from S$4,000 to S$8,000 for dependents is a welcome measure as it helps combat rising living costs and empowers upskilling individuals at the same time. The dependants can contribute to their household income through part-time work while studying, easing the family’s financial burden and supporting their own goals.
Cultivating economic prosperity through innovation
Adopting innovation to drive international competitiveness
Embracing a sustainable path forward
Directing efforts towards sustainability
Building talent resilience to navigate changes
Exploring strategies for developing resilience
Event: KPMG Singapore Budget 2024 Seminar
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Budget 2024 Proposal
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KPMG's SG Budget 2024 Insights
Recap our Budget 2024 proposal video episodes with KPMG in Singapore's leaders and industry experts as they share their keynotes on economic, social and sustainability topics that will pivot Singapore's path to a new reality.
Enhance enterprise capabilities in digitalisation, decarbonisation, and internationalisation
Building a future-ready city amidst growing complexities