Page 4 - RSM Budget 2023 Highlights

FOREWORD

Deputy Prime Minister and Finance Minister Lawrence Wong delivered his Budget Statement on 14 February 2023,
unveiling a Budget package which focuses on helping Singaporeans tide over immediate cost of living pressures,
growing the economy and equipping our people, strengthening Singapore’s social compact and building a more
resilient nation.

After weathering the COVID-19 pandemic for the last three years, we are finally seeing the hardest hit sectors, F&B,
retail, construction and travel, slowly emerging and returning to a certain degree of normalcy. That said, we are not
quite out of the woods yet as we continue to face a radically uncertain world, given the rising inflation, geopolitical
challenges and a possible new COVID-19 variant.

Whilst inflation might stay elevated over the next few years, the Minister cautioned that it would not be fiscally
sustainable to depend on the Government for support year after year. The way forward is to press on with
economic restructuring and transformation; businesses have to raise their productivity and upskill or reskill their
people to tackle future challenges. The ultimate benefit is largely directed towards Singaporeans, helping them
secure higher wages and have better job prospects.

What is foremost in everybody’s mind is the pressure to cope with rising prices and cost of living; which are partly
fuelled by the GST rate hike. To this end, the Minister metered out his “Valentine Day” surprise by increasing the
payouts under the GSTV and other support schemes for Singaporean households, especially those of the lower- to
middle-income groups to help defray their cost increases. A change has also been made with how Working
Mother’s Child Relief is to be calculated going forward from next year for qualifying children. This should bring joy to
eligible lower- to middle-income working mothers as it would translate to higher relief, which means less taxes to
pay, as compared to what the current formula provides if their present salary level is below $53,000 a year.

To provide temporary broad-base support for businesses should they continue to undertake upgrading or
restructuring activities this year, the capital expenditure incurred for plant and machinery acquisitions could be
written off on an accelerated basis, i.e. a 75% write off in YA 2024, followed by the remainder in YA 2025. This is in
comparison to the typical write-off of costs claimed equally over three tax years. A further accelerated option is to
allow qualifying renovation or refurbishment expenditure incurred this year to be wholly write off in this tax year,
subject to meeting conditions. These measures aim to ease cash flow pressures for businesses during this trying
period.

The Government is also ensuring that SMEs continue to receive the requisite support, if needed, from participating
financial institutions to help them overcome this challenging time. With this in mind, the Enterprise Financing
Scheme is extended for an additional year to 31 March 2024, with the same level of risk-share support from the
Government. The Energy Efficiency Grant support is similarly extended to help relevant business sectors invest
and adopt energy-efficient equipment to cut down their electricity bills.

Growing the economy and equipping our workers are the other key thrusts. The Minister had emphasised time and
again that Singapore needs to continue with economic transformation and restructuring. This is the only way to
build capabilities, innovate and grow in order to stay competitive in this challenging global environment and for our
people to seize opportunities in this post-pandemic era.

The new Enterprise Innovation Scheme (“EIS”) has been introduced to provide targeted support in the areas of
innovation, productivity and R&D to help build a more vibrant economy and better jobs for the workforce. Attractive
tax deductions will be given out for selected innovation activities. Even businesses which are unable to benefit from
the enhanced deductions or allowances under the various types of qualifying activities as they have little or no
taxable profits, will be given a non-taxable cash payout option in lieu of claiming the relevant tax deductions or
allowances. The cash conversion ratio is 20% of qualifying expenditure, up to $100,000. This will go some way to
assist smaller SMEs in offsetting costs incurred in the qualifying activities. The introduction of the EIS could
potentially be attractive to MNEs as well for them to consider Singapore as an alternative location to setup R&D
activities, register their IP and even conduct IP licensing activities as Singapore has a good network of tax treaties
with many countries across the world.

Technology continues to be a key enabler for growth and SMEs are encouraged to put in place a strong digital
framework to help compete and bring in greater business agility in a fast evolving world. E-commerce activities are
an increasingly important and relevant mode for overseas expansion. In this area, the Government has introduced

2 | RSM