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Singapore’s Budget 2023 centers around navigating global economic uncertainties by enhancing the country’s productivity and competitiveness.

Singapore’s Deputy PM and Finance Minister, Lawrence Wong, highlighted the US ban on advanced chip technology transfer to China and its ripple effects. He stated, “We are seeing a fierce competition for dominance in critical technologies, likely to intensify, leading to a concerning trend toward increased economic nationalism and protectionism worldwide.”

The Budget outlines objectives such as economic growth, worker support, particularly for displaced individuals through improved retraining and skill enhancement programs, and bolstering the country’s ability to withstand external economic shocks.

Wong emphasized the global competition for foreign investments. He believes Singapore can only maintain its edge by becoming even more appealing to investors. He added, “To stay ahead in this evolving landscape, we must intensify our efforts to elevate our overall productivity and workforce capabilities.”

Consequently, the National Productivity Fund will receive a S$4 billion boost and an expanded scope to encompass investment promotion.

Wong explained, “This fund will help us attract and secure more high-quality investments, supporting businesses in developing new proficiencies, enhancing our local business environments, and upskilling our workforce, ultimately leading to higher-paying jobs for Singaporeans.”

Other key points from the Budget include:

Support for Small and Medium Enterprises (SMEs)

An extra S$150 million will be allocated to the SME Co-Investment Fund, designated for investments in promising SMEs. The aim is also to stimulate an additional S$300 million in private investments to support SMEs.

Fostering Growth in Local Companies

Wong revealed a S$1 billion plan to assist promising companies through specialized capability-building initiatives. He suggested these could involve collaborating with specialists to “strengthen core leadership, accelerate international expansion, and establish robust talent pipelines.”

He further added, “Enterprise Singapore will aid them in securing resources for growth strategies and cultivating sustainable research and innovation capacities to reinforce their market value and competitive advantage.”

Retraining and Upskilling Initiatives

Wong acknowledged inconsistencies in training program quality and outcomes, noting that workers may be uncertain about suitable programs or necessary skills for better employment. He added, “Employers, especially SMEs, might find the training landscape unfamiliar, struggling to fill positions despite available candidates.”

He proposed a solution: “We need labor market facilitators to collaborate with industry, training, and job placement entities for optimal training and job placement. We will appoint Jobs-Skills Integrators for this role. Existing institutions can serve as Integrators with new responsibilities and expected results.”

Wong explained that Jobs-Skills Integrators would identify industry-specific workforce and skills gaps and collaborate with training providers to update or develop programs to bridge these gaps.

He added, “They’ll work closely with employment agencies, engage industry partners and unions, and identify individuals suited for training. Ensuring training leads to improved job prospects and earnings is crucial.”

A pilot program for Jobs-Skills Integrators will cover precision engineering, retail, and wholesale trade sectors.

Martijn Schouten, PwC South East Asia Consulting’s People and Organisation - Workforce Transformation Leader, believes this pilot is “a fantastic government support initiative.” By prioritizing reskilling, the initiative addresses talent shortages and efficiently matches skills supply and demand.

Ivan Chang, SGTech Talent & Capabilities Committee Co-Chair, welcomes the initiative’s potential to create tech jobs, stating that “job creation is increasingly influenced by new technology-driven roles.” He suggests expanding the initiative beyond the initial sectors, including ICT and SGTech.

Cecily Ng, Salesforce Singapore & Taiwan’s Senior VP and GM, views the Budget as a roadmap for “growth, new capability development, and resilience.” She highlights the focus on enhancing career prospects for Singaporeans through upskilling, ensuring better job and earning potential.

Ng sees the Forward Singapore exercise updates as reinforcing Salesforce’s efforts in democratizing tech education and employment opportunities. She stresses the importance of collaboration between “government, citizens, educational institutions, and the private sector” to bridge the skills gap.

She commends the government’s effort in establishing the Job-Skills Integrators program. Ng believes such collaborative endeavors are essential to fully leverage Singapore’s diverse talent pool, fostering resilience, growth, and enhanced business competitiveness.

Ng emphasizes the need to collectively reduce barriers to entry for tech roles and leverage untapped talent. Salesforce remains committed to addressing the training and reskilling needs in Singapore through various avenues, including their Trailhead online learning platform.

Ng highlights that Trailhead has empowered over 85,000 individuals in ASEAN to engage in the Salesforce ecosystem and the broader digital economy. She adds that Salesforce is dedicated to partnering with the public sector and institutions like NTU and ITE, driven by their belief in democratizing education and skills training, ensuring equal opportunities within the digital economy.

Lee Hawksley, UiPath Senior VP and MD for Asia Pacific and Japan, notes that the Budget reaffirms Singapore’s Smart Nation commitment. This is achieved by empowering the Singaporean workforce with upskilling and reskilling programs, including the new Jobs-Skills Integrators.

Hawksley underscores the importance of “democratizing information, access, and learning,” focusing on the combined strengths of human and digital workforces for the future of work. He believes developing new initiatives to build transferable digital skills can unlock growth opportunities, furthering the Singapore Economy 2030 vision.

Hawksley highlights automation’s transformative potential to empower individuals, ultimately benefiting society. However, to harness its full potential, he stresses the need for stronger “government, academia, and private sector collaborations.” This will drive sustainable technological adoption and role-based education across industries.

Enterprise Innovation Scheme

This new scheme introduces and enhances tax incentives to promote research and development (R&D), innovation, and capability development. Wong specified that tax deductions will cover five key areas of the innovation value chain:

i. Singapore-based R&D activities;

ii. Intellectual property registration, including patents, trademarks, and designs;

iii. Acquisition and licensing of intellectual property (IP) rights;

iv. Collaboration on innovation with polytechnics and ITE; and

v. SkillsFuture Singapore-approved training aligned with the Skills Framework.

Lennon Lee, PwC Singapore Tax Partner, welcomes the government’s efforts in attracting innovation and R&D to Singapore through the Enterprise Innovation Scheme. He suggests broadening the definition of R&D to encompass innovation and development projects without a novelty requirement, benefiting more Singaporean enterprises.

Tan Ching Ne, PwC Singapore’s Corporate Tax Leader, believes the scheme’s three pillars will significantly help businesses manage expenses related to innovation and IP creation.

Lee of PwC adds that the option to convert 20% of qualifying expenses into a cash payout (up to S$20,000) under the scheme will encourage more SMEs to pursue R&D and innovation in Singapore with partial cash subsidies.

Enhanced tax deductions under the scheme include:

An increased deduction from 100% to 400% for staff costs and consumables on qualifying R&D projects in Singapore, capped at the first S$400,000 for each Year of Assessment (YA) from YA2024 to YA2028.

The existing 100% deduction for all qualifying R&D expenses and the additional 150% deduction for staff costs and consumables on qualifying Singapore-based R&D projects still apply. All other existing eligibility criteria remain unchanged.

Similarly, an enhanced deduction increases the current 200% deduction to 400% for the first S$400,000 of qualifying IP registration costs (patents, trademarks, designs, plant varieties) for each YA from YA2024 to YA2028. Existing qualifying IP registration costs beyond the cap can still enjoy a 100% deduction. All other existing eligibility criteria remain applicable.

Currently, companies and partnerships benefit from a 100% write-down allowance on qualifying IP rights acquisition and a 200% deduction on the first S$100,000 of qualifying expenditure on licensing qualifying IP rights. Subsequent qualifying expenditures on licensing can receive a 100% deduction.

The Budget enhancement allows businesses with less than S$500 million in revenue to enjoy a 400% allowance/deduction on the first S$400,000 of qualifying expenditure for acquiring and licensing qualifying IP rights for each YA from YA2024 to YA2028. This S$400,000 cap applies collectively to IP acquisition and licensing. All existing eligibility criteria for these allowances/deductions remain applicable.

While a 100% tax deduction on training expenditure already exists, Budget 2023 introduces a 400% deduction for the first S$400,000 of qualifying training expenditure for each YA from YA2024 to YA2028. This applies only to SkillsFuture Singapore-funded courses aligned with the Skills Framework (available at go.gov.sg/eis-training). All other existing eligibility criteria remain unchanged.

Furthermore, businesses are encouraged to leverage existing technical and innovative expertise within polytechnics, ITE, or other qualified institutions. A new tax deduction allows businesses to claim 400% on qualifying innovation expenditures (up to S$50,000) for projects conducted with these partner institutions for each YA from YA2024 to YA2028. The collaborating institution will validate the project and issue an invoice. Expenses outside the collaboration are ineligible.

Abhijit Ghosh, PwC Singapore Corporate Tax Partner, acknowledges the positive impact of the tax deductions in fostering innovation. However, he questions if Singapore can swiftly build adequate capacity and capability to remain globally competitive for talent and funding. He suggests exploring collaboration opportunities with other countries, global businesses, and international institutions to nurture the innovation ecosystem in Singapore.

Enterprise Financing Scheme

Patrick Yeo, PwC Singapore Venture Hub Leader, believes that supporting the growth of tech companies into regional and global players is crucial for a thriving tech ecosystem. He views the continued access to the Enterprise Financing Scheme as positive news for these companies, helping them manage increasing costs and potential short-term funding gaps.

Global Enterprises Initiative

Yeo also welcomes the Global Enterprises initiative, seeing it as a timely response to the evolving market dynamics and geopolitical landscape. He believes the initiative will contribute to creating more global leaders headquartered in Singapore, strengthening the tech ecosystem’s competitiveness.

Chern-Yue Boey, SailPoint Senior VP for Asia Pacific, perceives Budget 2023 as a strategic shift from pandemic relief to securing Singapore’s long-term economic relevance. This is achieved by emphasizing innovation in the face of global economic challenges. The additional support for local enterprises encourages them to leverage their digital transformation efforts to innovate for greater competitiveness and resilience.

Boey emphasizes that embracing digital advancements is crucial for business survival, requiring advanced technologies, skills, and talent. However, this digital push also expands the threat landscape. As reliance on automation and IoT devices grows, so does the number of non-human identities. Therefore, robust safeguards for managing these machine identities, alongside human identities, are crucial.

A comprehensive identity management strategy enables businesses to effectively manage and control user access throughout their digital lifecycle, ensuring appropriate access for both human and machine identities.

Wong Wai Meng, SGTech Chair, welcomes the new enterprise innovation initiatives, including the Enterprise Innovation Scheme, SME Co-Investment Fund, and Singapore Global Enterprises Initiative. These initiatives underscore the importance of staying ahead of the curve and finding new avenues for growth. Meng sees technology as a key enabler in AI, digitalization, and trust-related technologies. He expresses SGTech’s eagerness to collaborate with relevant agencies, provide industry insights, and identify key tech growth areas where Singapore can intensify its efforts.

Support for Working Parents

The Tripartite Standard on Flexi-Work Arrangements will be mandatory next year. Paternity leave will be doubled from two to four weeks for eligible working fathers of Singaporean children born on or after 1 January 2024. The additional two weeks are initially voluntary, with the government reimbursing employers who provide this leave. Unpaid infant care leave for each parent in the child’s first two years will also double from six to twelve days annually.

Corporate Tax Changes

Wong signaled his intention to implement Pillar 2 of BEPS 2.0 from 2025 onwards. This aligns with the global movement to establish minimum corporate tax rates for large multinational enterprises (MNEs). Base erosion and profit shifting (BEPS) aims to reform international taxation, ensuring MNEs pay their fair share of taxes regardless of their operating location. As of 4 November 2021, over 135 countries and jurisdictions agreed to this plan, introducing a global minimum effective tax rate of 15% for large MNEs under Pillar 2.

Wong acknowledged the evolving nature of the situation, stating that many jurisdictions have yet to announce their implementation plans. Some key aspects of Pillar 2 were only recently finalized, while others remain under international discussion.

He added, “When implemented, we will introduce a domestic top-up tax to raise the effective tax rate for MNEs in Singapore to 15%.”

1 Under section 14C of the Income Tax Act 1947 (ITA).

2 Under section 14D of the ITA.

3 Under section 14A of the ITA.

4 Under section 19B of the ITA.

5 Under sections 14 or 14C, and section 14U of the ITA.

6 Under section 14 or 14C of the ITA.

7 Subject to the general tax deduction rules under sections 14 and 15 of the ITA.