Budget 2023: More progressive tax changes to help fund social support 

HIGHER top-end taxes for properties and cars were among progressive moves in a Budget that focused on strengthening the social compact and bolstering national resilience in a post-Covid era.

The changes to make Singapore’s tax regime more progressive are part of an “inclusive and fair approach” that ensures everyone – especially the vulnerable – benefits from government spending, said Finance Minister Lawrence Wong in Parliament on Tuesday (Feb 14).

“Our system is based on collective responsibility. Every citizen has a part to play in nation building. Everyone contributes something, but those who are better off contribute more,” he said.

The wealthier will face higher marginal Buyer’s Stamp Duty for higher-value properties, as well as a higher Additional Registration Fee for luxury cars.

And those with greater needs will receive more, with the Budget focusing on social support for parents and lower-income groups.

Even as the Budget included short-term help for households and businesses facing high inflation, Wong warned that it was not fiscally sustainable for Singaporeans to rely heavily on government support “year after year” to cope with inflation. “The reality is that even after the current high inflation surge moderates, inflation may only stabilise at a higher trend globally.”

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He also stressed the need for fiscal prudence when it comes to the reserves. From FY2020 to 2022, a total of S$40 billion was drawn from past reserves for emergency Covid-19 public health spending – though this is lower than the initial S$52 billion requested.

Singapore’s economy may have bounced back from the pandemic, but its fiscal position remains tight – and it is thus “highly unlikely” that the government will be able to return what was drawn, said Wong.

But no further draw is expected this year. As Singapore emerges from the pandemic, the overall fiscal deficit for FY2023 is estimated at S$0.4 billion or 0.5 per cent of gross domestic product (GDP) – down from S$2 billion, or 0.3 per cent of GDP, in the year prior.

While the past few Budgets had more direct subsidies for businesses to help them weather the Covid-19 storm, this year saw targeted support in areas of innovation, productivity and research and development.

These included a new Enterprise Innovation Scheme, which will give companies tax deductions for selected innovation activities.

Existing schemes were also enhanced or extended, with top-ups to the Singapore Global Enterprises initiative for promising local firms and the SME Co-Investment Fund for small and medium-sized enterprises. The National Productivity Fund will get a S$4 billion top-up and be expanded to cover investment promotion.

This Budget is about building capabilities and seizing opportunities in a new era of global development marked by uncertainty and volatility, said Wong.

“We must expect to see greater contestation and fragmentation in the global economy. Countries are thinking less about mutual benefit and interdependence, and more about national gain and security,” he warned.

As the world enters an era of “zero-sum thinking”, Singapore cannot assume that it will stay successful by doing the same things as the past, said Wong. “We will need to adjust to this new era, reposition our economy, and refresh our social compact for the future.”

He highlighted three key areas to strengthen social support: families, inequality, and the elderly.

Besides higher Baby Bonus cash payouts and longer leave, moves were announced to “support the housing aspirations of young Singaporeans”.

First-timer families with children, as well as couples aged 40 and younger, will get additional ballots for Build-to-Order flats. Eligible first timers will also get bigger grants when buying resale flats.

The Working Mother’s Child Relief will be changed to a fixed amount from the year of assessment 2025, such that lower- to middle-income working mothers may see their tax reliefs rise.

All these are part of efforts to build a resilient nation for “a new era where disruptions will likely happen more frequently”, said Wong.

He set out five aspects of this: strong organisational capabilities in the public and private sector; economic and infrastructure resilience; climate resilience by going low-carbon; building up the reserves; and building solidarity and trust among Singaporeans.

Noting this Budget’s “decisive moves” to grow the economy, equip workers, strengthen the social compact and build resilience, Wong added: “These moves are part of the broader strategy for our next bound of development, which we are co-creating with Singaporeans through the Forward Singapore exercise.”

While Singapore’s economy has recovered to pre-pandemic levels and should see “positive, albeit slower” growth this year, major uncertainties lie ahead, said Prime Minister Lee Hsien Loong in a Facebook post on Tuesday night.

But he added: “As long as we keep on building for the future, seizing new opportunities, and growing more resilient as one united people, we can move forward with confidence in the new era.”