5 key takeaways for the marketing community from Budget 2023

Deputy Prime Minister and Finance Minister Lawrence Wong delivered the 2023 budget today at the Parliament and focused heavily on Singapore's recovery post-COVID, the nation's financial position in a globalised world and how we can make adjustments to boost and grow businesses locally. Wong opened by stating that Singapore's economy grew by 3.6% in 2022. He added that while global inflation stood at 9%, Singapore managed to keep inflation at 4.1%. Resident unemployment also grew by 3.6% in 2022.

He then went on to lay out Singapore financial plan for the public and for businesses. Below, MARKETING-INTERACTIVE lays out some of the key takeaways from the Budget 2023 that businesses should focus on.

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1. Economists do not expect a global recession this year

Singapore has been cautious over the last few months with news of a potential recession swirling. However, according to Wong, economists are not expecting a global recession this year and Asia is forecasted to keep growing particularly as China's COVID-19 situation stabilises. China's economy is expected to continue reopening further and that will likely boost the global economy.  That said, Wong noted that while Singapore's economic growth will remain positive, it will slow at 0.5% to 2.5% this year.

"The EU is amongst the hardest-hit due to the economic consequences of its exposure to the war in Ukraine.The US is seeing slower growth, and may enter a recession, as the Federal Reserve continues to raise interest rates to Page 10 of 85 combat elevated inflation. Even so, many economists expect any contraction to be mild," he noted.

2. The new Enterprise Innovation Scheme

A new Enterprise Innovation Scheme was revealed by Wong. This will significantly enhance tax reductions for research and development conducted in Singapore, the registration of intellectual property, acquiring and licensing intellectual property rights, innovations carried out with polytechnics and ITE and training through courses approved by SkillsFuture. 

For each of these activities, the government will raise tax deduction to 400% of qualifying expenditure. This is up from 250%. The qualifying expenditure will be capped at SG$400,000 except for innovation carried out by polytechnics and ITE which will see caps of SG$50,000.

"With these enhancements, businesses that make full use of the scheme could enjoy tax savings of nearly 70% of their investment," Wong said. 

Additionally, SG$4 billion will be added to the National Productivity Fund in order to secure more quality investments in Singapore. This fund provides grants for companies to invest in productivity, training and further education It will now be expanded to include investment promotions to support companies as they build new capabilities, upskill workers and add value to its domestic ecosystems. Ultimately, the hope is that these efforts will lead to Singaporeans having better paying jobs, according to Wong. 

During his speech, Wong noted that there is a need for labour market intermediaries to optimise training and job placement. This is because many workers may not know what training programmes to go for. Employers might also be unfamilier with such a landscape. These intermediaries, or job-skills integrators, will be appointed to work with industry, training and employment facilitation partners such that enterprises will be able understand the manpower and skills gap in the sector. 

The skills gap will be narrowed with an update to existing training programmes and the development of new ones. Additionally, these integrators will also work closely with employment facilitation agencies to identify individuals with the appropriate aptitude such that the training translates into better employment and earning prospects.

This will initially be trialed in the precision engineering, retail and wholesale trade sectors as these industries see a higher concentration of mature workers and SMEs.

5. The tax system will be adjusted

In order to help grow the economy, raise revenue, strengthen social safety nets and enhance national resilience, Wong said that the government will have to spend more. As a result, the additional spending will have to be funded by additional revenue which is why the overall tax structure will be changes. There will be increases in goods and services tax, personal income tax for top income-earners, property tax for higher-value owner-occupied residential properties and all non-owner-occupied residential properties.

"I will adjust the Buyer’s Stamp Duty, or BSD, regime, which applies to all purchases or receipt of gifts of immovable properties in Singapore," said Wong. "I will introduce higher marginal BSD rates for higher-value residential and non-residential properties," he continued.

A global minimum effective tax rate of 15% will also be introduced for large multinational enterprise (MNE) groups. Singapore’s corporate tax system will then be affected by international taxation rules such as the Global Anti-Base Erosion rules under Pillar 2 of the Base Erosion and Profit Shifting initiative (Beps 2.0).

"The EU recently announced its plans to implement Pillar 2 in phases starting effectively from 2024. Other jurisdictions like the UK and Switzerland have announced their intention to do the same. As the rules will be implemented progressively, the full effects will only be felt in 2025 or later<" Wong said.

He added that he intends to implement Pillar 2 from 2025. He will do this by implementing a Domestic Top-up Tax to top up MNE groups’ effective tax rate in Singapore to 15%.

That said, the government will continue to keep the overall tax system fair and progressive and will continue to make adjustments throughout the year. It will also engage companies and give them appropriate notice ahead of any changes.

Consumer front conversations

Analysing social conversation over the last seven days, media intelligence company CARMA said one of the areas that came up over and over again was around rising cost of living. Another common argument is around GST hikes. Housing is among the top concerns. Interestingly, many feel that government's beliefs don't match with on-ground sentiments, said CARMA. Many Singaporeans anxious about rising housing costs and the lengthy wait for a BTO. "Online opinions find that the budget should ideally have more strategic longer term initiatives and plans. As of now it’s mostly very tactical," the spokesperson added.

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