Page 3 - RSM Budget 2021 Highlights

FOREWORD

The COVID-19 pandemic is far from over. We have not seen the light at the end of the tunnel yet. The Government
has already spent nearly $100 billion in five Budgets last year to help Singapore tide over the pandemic, racking up
in consequence the largest Budget deficit since independence. This is a rather grim message from the Deputy Prime
Minister Heng Swee Keat as he delivered his Budget Speech on 16 February 2021.

This year’s Budget is a fine balance between an $11 billion COVID-19 Resilience Package, providing immediate help
to sectors which are still under stress from the pandemic, and a $24 billion investment in Singapore’s longer term
needs in building new capabilities in our people and businesses.

The focus of 2021 Budget is on accelerating structural adaptations, i.e. structural economic policies to equip
businesses and workers with deep and future-ready capabilities through three key enablers. The first enabler is to
grow a vibrant business community with a strong spirit of innovation and enterprise, deeply connected with Asia
and the world. The second enabler is to catalyse a wide range of capital to co-fund and enable businesses, from
start-ups to small, medium and large enterprises, to innovate, transform and scale. Equally important is the third
enabler which is to create opportunities and redesign jobs for our people to develop their skills, creativity and talents.

The Minister also addressed building a sustainable Singapore for future generations. The launching of the Singapore
Green Plan 2030 aims, amongst others, to green up Singapore and promote a car-lite society. With that the revised
road tax treatment for electric cars was announced and the petrol duty rates upped immediately.

A fiscal deficit is unavoidable during this pandemic but a return to running balanced budgets is the aim of the
Government. The country’s longer term fiscal needs will be further reviewed. So will the taxation framework as the
Singapore revenue base may be eroded as soon as the international tax rules that determine the allocation of taxing
rights among various jurisdictions are changed following from the discussion under the Base Erosion and Profit
Shifting initiative. Singapore may then also become less attractive for global companies to locate their operations
here. For now, taxpayers are relieved to learn of no corporate and personal income tax increases apart from petrol
taxes. Also no further curbs were announced on property purchases in Singapore.

A disappointment to note is the absence of corporate tax rebates which companies used to enjoy for at least the
past five years. This would mean that companies will generally pay higher taxes for the same amount of taxable
income earned in 2020 compared to previous years.

GST is set to increase by 2% sooner rather than later, which means the hike may perhaps occur in late 2022 or early
2023. The imposition of GST on imported low-value goods as well as consumer imported non-digital services
however will kick in from January 2023.
This Budget is a carefully thought out package, taking into consideration short, medium and long term needs of
Singapore going forward. Emerging stronger together as a nation is definitely key to Singapore’s success.

Cindy Lim

Partner
16 February 2021

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