Deloitte Singapore’s response to the “Moving Forward in a New Era” Singapore Budget 2023

SINGAPORE, 14 February 2023 – Deloitte Singapore’s subject matter experts share their reactions and comments to the Singapore Budget 2023 announced today.

Overview of Singapore Budget 2023

Mr CHEUNG Pui Yuen (鍾培源), Chief Executive Officer (首席执行官), Deloitte Singapore (德勤新加坡):

“The Singapore Budget 2023 Valentine’s Day bundle of incentives and schemes demonstrates that enterprises are the heart of the Singapore economy. In particular, the Enterprise Innovation Scheme and the S$1 billion boost to the Singapore Global Enterprises Initiative will give a much-needed push towards productivity. With these steps to nurture and develop enterprises in Singapore, business leaders are encouraged to shift into a higher gear, build capabilities and scale up in order to secure a resilient future in the new era.”

Mr LOW Hwee Chua (刘辉泉), Tax & Legal Leader (税务区域领导), Deloitte Singapore (德勤新加坡):

“Singapore Budget 2023 is indeed a Valentine’s Day gift that holds true to the love language of security, resilience and unity in the new era. The Government has taken a bold step towards the future with Deputy Prime Minister and Finance Minister Lawrence Wong’s promise to help citizens seize new opportunities, strengthen the nation’s social compact, and provide assurance for families. This marks a significant shift in the nation’s outlook for post-pandemic times, and is an encouraging sign of the Government’s commitment towards building a better tomorrow. With the collective effort of the Government and people of Singapore, the nation will be better positioned to weather the storm and come out stronger.”

“Through initiatives such as increased support for businesses and families, improved access to healthcare and education, and the development of a strong economy, the Government has demonstrated its commitment towards creating an environment conducive to seizing promising opportunities and enabling citizens to strive for a better future. This is a testament to the Government’s heart for the welfare of its people and the nation as a whole.”

Mr YAP Hsien Yew (叶贤佑), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“The Singapore Government's commitment to an innovative and inclusive economy has been highlighted in the 2023 budget. This includes measures such as the Enterprise Innovation Scheme and SME Co-Investment Fund, which aim to foster entrepreneurship and innovation, while also providing opportunities for social mobility and senior care. The focus is also on upskilling and reskilling workers to create a more adaptable and resilient workforce. The ultimate goal is to enhance productivity and competitiveness in the economy, leading to sustained long-term growth and stability, as well as improved well-being for Singapore's citizens. As the saying goes, the initiatives aim to not just give people fish, but teach them how to fish for a lifetime.”

Mr WONG Chee Ming (黄志明), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

"A highly inclusive Budget encompassing diverse business, societal and environmental sectors to build a resilient and sustainable country against the challenging global backdrop, inflation and climate change. Coherent with our founding father’s vision to “look at the horizon, find that rainbow, go ride it”, the tax and fiscal measures announced in the Budget will build an economically sound country that would be vigorous and robust for many years to come."

Enterprise Innovation Scheme

Ms Yvaine GAN (颜心怡), Global Investment & Innovation Incentives Leader (全球投资与创新激励主管), Deloitte Singapore (德勤新加坡):

“The Enterprise Innovation Scheme (EIS) looks like a potential game-changer for encouraging businesses to continue investing in R&D locally and even for MNCs considering Singapore as a potential location for R&D activities. The option to convert up to 20 percent of qualifying expenses to cash will be welcome by businesses working toward profitability. We hope the Government will be able to apply learnings from administering the hugely popular PIC scheme to the EIS!”

Mr LOH Eng Kiat (卢英杰), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“Businesses will cheer the newly-announced Enterprise Innovation Scheme which allows for super tax deduction for 5 key activities including local research and development activities and approved training. At first glance, this appears remarkably similar to, but is likely a more targeted version of the highly popular Productivity and Innovation Credit (PIC) scheme which was phased out a number of years ago. #PIC2.0?”

Mr Larry LOW (刘俊彬), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“It seems that the Minister has “revived” the Productivity and Innovation Credit (PIC) Scheme, which lapsed in Year of Assessment 2018, in the form of a new Enterprise Innovation Scheme (EIS), albeit with slightly different activities. Training, among others, continues to be a qualifying activity which is in line with the Government’s objective of building capabilities and continuous improvement of workforce upskilling and productivity.”

“Given the lessons learnt from the old PIC Scheme that lapsed in Year of Assessment 2018, execution of the new EIS is expected to be more seamless. The IRAS does not need to reinvent the wheel as measures previously put in place to curb PIC abuse may similarly be put in place for the EIS.”

“It is interesting that the Government has capped the qualifying expenditure for innovation carried out with polytechnics and ITE to S$50,000, while the expenditure for the remaining qualifying activities is capped at S$400,000. It is nonetheless heartening to see the Government recognising the role that polytechnics and ITE may play in embracing and supporting innovation in the marketplace, and encouraging enterprises to collaborate with these institutions via the EIS.”

Singapore Global Enterprises initiative

Mr Daniel HO (何仁奇), Mergers & Acquisition Tax Leader, Deloitte Singapore (德勤新加坡):

“The additional funds set aside for the Singapore Global Enterprises Initiative and SME Co-investment Fund is expected to fuel greater M&A activity in the region & beyond and is a good move to transform home-grown companies into global enterprises that can compete better.”

National Productivity Fund

Mr YAP Hsien Yew (叶贤佑), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“The proposed injection of $4 billion into the National Productivity Fund under Budget 2023 is a positive stride in the right direction for Singapore's economy. This move shows the Government's unwavering commitment to uplifting local businesses and empowering the workforce, resulting in quality investments and better paying jobs for Singaporeans.”

BEPS 2.0

Ms LIEW Li Mei (刘丽梅), International Tax Leader (国际税主管), Deloitte Singapore (德勤新加坡):

“So 2025 it is! Well at least for the time being....

Now that the Minister has made it clear that Singapore intends to implement Pillar Two in 2025 and accordingly, a Domestic Top-up Tax, it becomes even more pressing for MNE groups impacted by Pillar Two to ready themselves by understanding what Pillar Two entails and ensure that they are ready to comply with the filing requirements in the near future.

It is also heartening to hear that the Minister has made it clear that Singapore will continue to keep a close tab on international developments, and if necessary, delay the implementation of Pillar Two.

MNE groups will also appreciate the Minister's announcement that companies impacted by Pillar Two will be given sufficient time to prepare before the rules come into effect.”

Mr Daniel HO (何仁奇), Mergers & Acquisition Tax Leader, Deloitte Singapore (德勤新加坡):

“With tax incentives expected to play a lesser role under the Global Minimum Tax regime, it is welcome to note that the NPF can be tapped for investment promotion. MNCs will be keen to find out what would be the key investment metrics that would be considered in order to access the funds, now that clarity has been given that Singapore would introduce the global minimum tax in 2025.”

Mr Rohan SOLAPURKAR, Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“We have been waiting to see if the Minister will announce Singapore’s response to the Pillar Two Rules as some countries have already announced their intention to adopt the Rules from 2024 – he did not disappoint… 2025 for the implementation of the Pillar Two Rules and the domestic minimum tax.”

Support for businesses

Mr LEE Tiong Heng (李忠兴), Tax Partner (税务合伙人) and Global Investment & Innovation Incentives Leader (全球投资与创新激励主管), Deloitte Southeast Asia (德勤东南亚):

“The Minister’s statement signals the end of indefinite Government support, urging Singaporeans to prepare for post-2024 productivity and competitiveness. Collaboration between individuals and businesses, investing in emerging industries, innovation, and employee training are crucial for sustained economic growth.”

“The Government’s continuous vision of leading Singapore businesses onto the world scene has once again been echoed in this Budget with the enhancement of SME co-investment fund, private SME investment fund and customised support for Singapore companies. This is an encouraging message and support for local companies to venture out with adequate funding and establish a strong foothold in the global market.”

Mr Rohan SOLAPURKAR, Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“R&D tax incentives increased to 400 percent on certain specific expenses – this move will incentivise companies to carry on R&D activities in Singapore.”

Mr LOH Eng Kiat (卢英杰), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“Deputy Prime Minister and Minister for Finance Lawrence Wong has stressed on various occasions that “…it cannot be business-as-usual…”, while expressing his hope that Singaporeans can “…have honest conversations…” as they tackle the difficulties that they may be facing.

With many of the fiscal support measures for businesses announced in today’s speech leaning towards a more targeted rather than broad-based approach, this signals the Government’s expectation for businesses to take greater ownership over their own cost struggles. This is understandable as good stewardship and resource optimisation has to remain a priority for the Government of the day.”

Ms Yvaine GAN (颜心怡), Global Investment & Innovation Incentives Leader (全球投资与创新激励主管), Deloitte Singapore (德勤新加坡):

“Businesses in the Food Services, Food Manufacturing and Retail sectors that were one of the hardest hit by Covid-19 but are hoping to turn a corner with Singapore entering a endemic phase will be pleased to hear that the impact of increasing cost pressures from rising energy prices will be soften by the extension of the Energy Efficiency Grant. Time to install those energy-saving LED lights!”

Mr YAP Hsien Yew (叶贤佑), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“Budget 2023 demonstrates the Government’s commitment to supporting and uplifting businesses amidst challenging times, and businesses will have the resources and incentives they need to upgrade, improve, and thrive in the digital economy. This budget sets the stage for a vibrant and resilient business community in Singapore.”

Cost of Living

Ms Sabrina SIA (佘爱玲), Global Employer Services Tax Leader (全球雇主服务领导), Deloitte Singapore (德勤新加坡):

“As expected, there was no personal income tax rebate proposed by the Minister given that there is need to ensure fiscal prudence to balance the Budget, and in view that such tax rebates will not provide much support towards addressing inflationary cost pressures for a significant part of the population who pay little or no tax.”

“The change in the Working Mother's Child Relief from a percentage of earned income to fixed quantums for Singapore citizen babies born on or after 1 January 2024 comes as a surprise, as this will have quite a significant tax impact to working mothers with higher incomes, despite the cap limit of S$50,000 per child for all qualifying child relief claims and an annual personal relief cap of S$80,000. These changes do however appear to be in line with the Government's objectives to enhance the progressivity of our tax system, as the middle-income group will benefit more from having fixed relief quantums.”

Mr YAP Hsien Yew (叶贤佑), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“Budget 2023 demonstrates the Government's determination to tackle inequality and support families. The new measures include extending Government-paid paternity leave and increasing unpaid infant care leave to promote gender equality and encourage fathers to play an active role in child-rearing. Top-ups to the ComCare Endowment Fund and scaling up of the KidSTART initiative will aid low-income families, while tax relief changes for working mothers with children born from 2024 will further support families. These announcements signal a brighter future for Singaporean families.”

“Singaporeans will welcome the news from Budget 2023 as the Government reaffirms its commitment to supporting retirement savings. The increase in CPF contribution rates and monthly payouts for seniors will provide much-needed financial security for older and middle-income earners. Gig workers also benefit from CPF rate adjustments and transition support, showing the Government's recognition of the importance of the gig economy. The added resources for the ElderCare Fund and MediFund will be a relief for seniors in need.

The ComLink and KidSTART initiatives are well-received by the public, as they tackle inequality and provide opportunities for self-reliance and social mobility for lower-income families. Overall, Budget 2023 is a step in the right direction towards a more inclusive and equitable society.”

Support for sports

Mr LOH Eng Kiat (卢英杰), Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“While the Government announced in last year's Budget 2022 that it remains committed to match sports donations on a dollar-for-dollar basis (up to $50 million) for the next few years under the One Team Singapore Fund, it bears reiterating that the definition of the Sports sector itself is becoming more expansive, going beyond traditional sports and should commonly include various forms of e-sports and gaming.

That said, there may be good reason why this $50 million cap remains unchanged and not discussed in today's speech: the total quantum of underlying sports donations from the public is way below this threshold to merit any meaningful increase.

A point to also consider for future Budgets would be whether the tax deduction rules for donations can be liberalised further, which may in turn incentivise sports donors to contribute more.”

Carbon Tax/Sustainability

Ms GIAM Ei Leen (严翊淩), Sustainability & Climate Leader, Deloitte Singapore (德勤新加坡):

“Given the current global landscape, with uncertainties and persistent pressures on economies throughout the world, the focus of the Budget is geared towards assisting households and businesses in battling these headwinds.

We note that the Budget speech did reiterate Singapore’s commitment to safeguarding climate resilience, such as through the implementation of the carbon tax, as part of strategies to improve national resilience.

As the economy strengthens, we look forward to further commitments towards addressing the challenges arising from climate change and to accelerate our transition towards a greener economy.”

Immigration

Ms Sandip BHANDAL, Tax Partner (税务合伙人), Deloitte Singapore (德勤新加坡):

“It comes as no surprise that there are no significant immigration changes that have been announced as part of this year’s Budget, given that the MOM has announced a number of enhancements to the Work Pass framework over the last 12 months. The Overseas Networks & Expertise pass was recently introduced as an additional option for eligible foreign nationals. The main focus this year is on the launch and full implementation of the new Points Based System (COMPASS) for Employment Pass applications.”

Development & Expansion Incentive

Ms Yvaine GAN (颜心怡), Global Investment & Innovation Incentives Leader (全球投资与创新激励主管), Deloitte Singapore (德勤新加坡):

“The Development and Expansion Incentive continues to be a key tool in attracting foreign investments into Singapore, as not all companies will be affected by Pillar Two. The extension of the DEI will ensure that Singapore remains attractive to foreign investors and growing multinationals.”

IP Development Incentive

Ms Yvaine GAN (颜心怡), Global Investment & Innovation Incentives Leader (全球投资与创新激励主管), Deloitte Singapore (德勤新加坡):

“We welcome the extension of the IP Development Incentive, which will continue to encourage the relocation and commercialisation of R&D activities in Singapore.”

Increase in excise duties on tobacco

Mr WONG Meng Yew (王明耀), Sustainability and Climate Tax Leader, Deloitte Singapore (德勤新加坡):

“With the raise in excise duty of all tobacco products by 15 per cent, the focus is not so much on the increase in revenue, but the Government sending a strong signal to discourage the consumption of such products. This is also in line with the national policy of periodic raises, especially since the last increase was back in 2018.”

Increase in ARF rates

Mr WONG Meng Yew (王明耀), Global Trade Advisory Leader (海关和全球贸易东南亚主管), Deloitte Singapore (德勤新加坡):

“An increase in the Additional Registration Fee (ARF) rates for luxury vehicles to 320 percent on the back of the introduction of the ARF structure last year in 2022 highlights the need for the Government to make a larger impact on the sales of luxury vehicles. It also proves that these are indeed price inelastic. This change is expected to affect as much as one-third of the current market.”