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"We are seeing a huge contest for leadership in key technologies, which is likely to escalate with time," said Singapore's Deputy PM and Minister for Finance, Lawrence Wong, of the US ban on the flow of high-end chips and chipmaking to China, which has in turn sparked domestic investments in technology.
"All this is setting off a dangerous dynamic towards greater economic nationalism and protectionism around the world."
Goals announced in the Budget included growing the economy, supporting workers, including displaced workers, with a better system of reskilling and upskilling, as well as strengthening the country's resilience to withstand external shocks better.
Wong highlighted the global race to attract foreign investments and said the only way to stay ahead would be for Singapore to become even more attractive to investors. "We will therefore have to work harder to enhance our overall productivity and workforce quality to stay competitive in this new environment," he said.
As a result, the National Productivity Fund will receive a S$4 B top-up. Its scope will also be expanded to support investment promotion.
"We will use the fund to anchor more quality investments here. This includes supporting companies to build new capabilities, add greater value to our domestic ecosystems, and upskill our workers. And ultimately, these efforts will lead to better paying jobs for Singaporeans," Wong said. Other Budget highlights included:
Investing in small and medium sized enterprises (SMEs)
An additional S$150 million will be apportioned to the SME Co-Investment Fund. The money will be earmarked for investments in promising SMEs. The government also aims to catalyse an additional S$300 million of private investments to support our SMEs.
Helping local firms grow
Wong announced S$1 billion to help promising companies through specialised capability building programmes tailored to their needs. "This could involve working with experts to strengthen the core leadership team, accelerate their internationalisation plans, and build a strong talent pipeline," Wong suggested.
"Enterprise Singapore will also support them to secure resources to execute their growth plans, and to build sustained research and innovation capabilities so they can strengthen their value proposition and stay competitive."
Reskilling and upskilling
Wong noted that training programmes vary in quality and outcomes. "Workers themselves may not know what training programmes to go for, or what competencies and skills they need to secure better jobs," he added.
"Employers, especially amongst the SMEs, may also be unfamiliar with the training landscape, and often struggle to fill job vacancies despite available jobseeker pools.
"There is therefore a need to develop labour market intermediaries who can work with industry, training, and employment facilitation partners to optimise training and job placement. So we will appoint and equip Jobs-Skills Integrators to do this work. The Integrators can be existing institutions. But they will have new responsibilities and outcomes to deliver."
Jobs-Skills Integrators will have to understand the manpower and skills gap in the industry, and then work with training providers to update existing training programmes, or develop new ones that will close the skills gap, Wong said.
"They will also have to work closely with employment facilitation agencies, get buy-in from industry partners and unions, and identify individuals with the right aptitude and fit for training. Most importantly, they must ensure that training translates into better employment and earnings prospects," he shared.
A pilot for Jobs-Skills Integrators will cover the precision engineering, retail, and wholesale trade sectors.
“The new Jobs-Skills Integrators pilot – which aims to help employers enhance training and place workers in suitable roles – is a fantastic means of government support that prioritises reskilling and upskilling as a key workforce strategy. To facilitate job matching, identification of skills gaps and training will not only alleviate enterprises’ talent crunch pressures, but will enhance effectiveness of matching demand and supply of key skills for the future,” commented Martijn Schouten, People and Organisation - Workforce Transformation Leader, PwC South East Asia Consulting.
“The Job Skills Integrators initiative is welcomed as it helps build a skilled and adaptable Singapore workforce in the three pilot industries. Increasingly, job creation is impacted by the emergence of new occupational profiles tailored to new technologies and to respond to the demand for new technology-based products and services. As such, the Job Skills Integrators initiative will also help boost ICT jobs in the tech sector and elsewhere. We believe the initiative should be expanded to other industries, including ICT and SGTech is ready to work closely with relevant stakeholders to enhance this initiative's robustness,” said Ivan Chang, Co-Chair, SGTech Talent & Capabilities Committee. ICT stands for information and communications technology.
Cecily Ng, Senior VP and GM, Salesforce Singapore & Taiwan said: "The Budget announcements this year are focused on charting growth, building new capabilities, and resilience for citizens and businesses. Coupled with the support for citizens to manage today’s challenges, there is an emphasis on improving careers for Singaporeans, by deepening existing skill sets to ensure better employment and earnings prospects.
"In particular, the updates to the Forward Singapore exercise in this year’s budget supports and reaffirms our efforts to democratise opportunities for education and employment for tech roles. Closing the skills gap must be a collective effort between the government, the people, educational institutions and the private sector. The government’s commitment to bringing together industry partners and training providers via the Job-Skills Integrators programme is a necessary step to ensure that training leads to favourable employment outcomes. These joint efforts across the ecosystem are needed to capture the potential of Singapore’s emerging and diverse talent pool, drive resilience and growth, and enhance business competitiveness.
"We must collectively work towards lowering the barriers to entry to tech roles, and leveraging untapped talent in the workforce. Salesforce is committed to addressing the training and reskilling imperative in Singapore through multiple pathways including our online learning platform Trailhead. The certifications and micro-credentials offered by Trailhead have empowered over 85,000 people in ASEAN to participate in the Salesforce ecosystem, and the larger digital economy. In fact, the Salesforce ecosystem not only provides a platform and community for learning, but a place that connects people to jobs through our partners and customers.
"We continue forging partnerships with the public sector and educational institutes like NTU and ITE, anchored by our firm belief in the need to democratise education and skills training, and ensure everyone has equal opportunity to benefit from the digital economy. At the same time, leaders, both, in the private and public sector, must ensure that a digital-first mindset and culture of continuous learning is part of their organisation’s DNA in order to help close the digital skills gap more efficiently."
"Building the digital economy has been a longstanding goal in Singapore. The Singapore government continues to solidify its Smart Nation commitment by empowering the Singapore workforce with upskilling and reskilling initiatives, including new Jobs-Skills Integrators that will work closely with employment facilitation agencies, industry partners, and training partners, as highlighted in the 2023 Budget announcement," noted Lee Hawksley, Senior VP and MD of Asia Pacific and Japan, UiPath.
"Democratising information, access, and learning should be a key priority as we focus on capitalising on the strengths of human and digital workforces in the future of work.
"Developing new initiatives and programmes that build new transferable digital capabilities can create new opportunities for growth to propel the Singapore Economy 2030 vision forward."
Hawksley observed that automation, in particular, "has the transformative power to bring out the best in people, and this in turn gives people the potential to bring out the best in society". "But to unlock the massive potential of automation, we need to strengthen collaborations among the government, the academia, and the private sector, to drive sustainable technological adoption across industries and better propagate role-based education," he said.
Enterprise Innovation Scheme
Under the new Enterprise Innovation Scheme features tax measures that will be enhanced or introduced to encourage research and development (R&D), innovation, and capability development activities. Specifically, Wong said tax deductions will cover five aspects of the innovation value chain:
i. R&D conducted in Singapore;
ii. Registration of intellectual property, including patents, trademarks, and designs;
iii. Acquisition and licensing of intellectual property (IP) rights;
iv. Innovation carried out with polytechnics and ITE; and
v. Training via courses approved by SkillsFuture Singapore and aligned to the Skills Framework.
“The Singapore government has redoubled its efforts in the global R&D race to attract innovation and R&D activities to be conducted in Singapore through the introduction of Enterprise Innovation Scheme by additional tax deductions on qualifying expenses for qualifying activities. In particular, on local R&D activities, I hope the Singapore government can also relax the definition of R&D to include innovation and development projects that may not have a novelty factor so that more Singapore enterprises would benefit under the new scheme,” observed Lennon Lee, Partner, Tax, PwC Singapore.
Tan Ching Ne, Corporate Tax Leader, PwC Singapore, also commented on the scheme, saying: "The three pillars of the proposed Enterprise Innovation Scheme will help businesses defray a significant portion of the expenses connected to innovation and the creation of IPs.”
“With the option to convert 20% of the total qualifying expenditure into a cash payout of up to S$20,000 under the Enterprise Innovation Scheme, we should see more SMEs willing to take risks by conducting R&D and innovation activities in Singapore partially funded by the cash subsidies,” Lee of PwC added.
The enhanced tax deductions under the scheme include:
An enhanced tax deduction to allow businesses to enjoy a 400% tax deduction for the first S$400,000 of staff costs and consumables incurred on qualifying R&D projects conducted in Singapore for each Year of Assessment (YA) from YA2024 to YA2028.
Today, businesses enjoy a 100% tax deduction for all qualifying R&D expenditure incurred on qualifying R&D projects,1 and an additional 150% tax deduction for staff costs and consumables incurred on qualifying R&D projects conducted in Singapore.2
All other existing eligibility criteria and conditions for tax deductions on staff costs and consumables incurred on qualifying R&D projects conducted in Singapore are applicable to the enhancement.
Similarly, businesses currently enjoy a 200% tax deduction on the first S$100,000 of qualifying IP registration costs on the registration of patents, trademarks, designs, and plant varieties today. Subsequent qualifying IP registration costs can enjoy a 100% tax deduction.3
As announced in Budget 2023, an enhanced tax deduction will allow businesses to enjoy a 400% tax deduction for the first S$400,000 of qualifying IP registration costs incurred for each YA from YA2024 to YA2028. All other existing eligibility criteria and conditions for tax deductions on qualifying IP registration costs are applicable to the enhancement.
Under existing tax measures for IP rights, companies and partnerships can enjoy a 100% write-down allowance on capital expenditure incurred on the acquisition of qualifying IP rights4. Businesses can enjoy a 200% tax deduction on the first S$100,000 of qualifying expenditure on licensing of qualifying IP rights5. Subsequent expenditure on licensing of qualifying IP rights can qualify for a 100% tax deduction6.
The Budget enhancement will allow businesses to enjoy tax allowances/deductions of 400% for the first S$400,000 of qualifying expenditure incurred on the acquisition and licensing of qualifying IP rights for each YA from YA2024 to YA2028. The expenditure cap of S$400,000 is applied across IP rights acquisition and licensing collectively. However, the enhancement will only be available to businesses that generate less than S$500 M in revenue in the relevant YA.
All other existing eligibility criteria and conditions for tax allowances/deductions on acquisition and licensing of qualifying IP rights are applicable to the enhancement.
While businesses can already claim a 100% tax deduction on training expenditure as a deductible business expense7, Budget 2023 has changed this to a tax deduction of 400% for the first S$400,000 of qualifying training expenditure incurred for each YA from YA2024 to YA2028.
The enhancement is only applicable to qualifying training expenditure incurred on courses that are eligible for SkillsFuture Singapore funding and aligned with the Skills Framework. The list of courses that are eligible is available on go.gov.sg/eis-training. All other existing eligibility criteria and conditions for tax deductions on training expenditure are applicable to the enhancement.
Further, businesses are encouraged to kickstart their innovation journey by tapping on existing technical and innovation capabilities within the polytechnics, the ITE or other qualified partners. The government will introduce a new tax deduction where businesses can claim a 400% tax deduction for up to S$50,000 of qualifying innovation expenditures incurred on qualifying innovation projects carried out with partner institutions for each YA from YA2024 to YA2028.
The relevant partner institutions will validate the project as a qualifying innovation project and issue an innovation project invoice. Expenditure incurred outside of the collaboration with the partner institution will not qualify for this tax deduction.
“While additional tax deduction to promote a pervasive innovative environment is welcome, it needs to be seen if Singapore can quickly build substantial capacity and capability to be innovative and remain relevant as the competition for global talents and innovative funding grows stiffer. We may have to seek opportunities to collaborate with other countries, global businesses and international educational institutions to nurture the innovative ecosystem in Singapore,” said Abhijit Ghosh, Partner specialising in Corporate Tax, PwC Singapore.
Enterprise Financing Scheme
"For our tech ecosystem to thrive, our innovative tech companies need to scale regionally and even globally. Hence, it is good news for growth-stage tech firms to be able to continue tapping on the Enterprise Financing Scheme to address their rising costs and potentially, short-term funding gaps," said Patrick Yeo, Venture Hub Leader, PwC Singapore.
Global Enterprises initiative
"The Singapore Global Enterprises initiative is timely to take advantage of the changing market dynamics and geopolitical environment. This scheme will be useful to create more global winners headquartered in Singapore so that our tech ecosystem can thrive in the face of increasing competition," Yeo from PwC added.
Chern-Yue Boey, Senior VP, Asia Pacific, SailPoint said: “Budget 2023 signals a shift in the mandate for Singapore, from immediate pandemic-focused relief measures to ensuring Singapore’s long-term economic relevance and viability through a concerted focus on innovation. Especially amidst global headwinds that precipice the nation-state against a tough business climate, the newly- announced added support for local enterprises provides a much-needed boost for businesses to build on existing digital transformation efforts to innovate for greater competitiveness and resilience. After all, heeding the digital imperative will remain critical for businesses to survive - with the requisite advanced technologies, skills, and talent for it.
"Yet, this concerted push towards growing our digital economy will inevitably see the threat surface expand. With emphasis on technology adoption and innovation, we will witness explosive growth of non-human identities as our reliance on robotic process automation (RPA) technologies and IoT devices grows in tandem.
"We must therefore ensure the necessary guardrails are in place to manage these machine identities along with employee, contractor and third-party identities. With a comprehensive identity management strategy, businesses can automate the discovery, management, and control of all user access throughout their digital life cycle, and ensure each identity (human or machine) always has the proper access needed to do their job."
“SGTech welcomes the new enterprise innovation initiatives (Enterprise Innovation Scheme, SME Co-Investment Fund and Singapore Global Enterprises Initiative) that will help boost the productivity of our enterprises. These generous programmes signal that our enterprises must stay ahead of the curve and find creative and innovative ways to grow. In this regard, tech can be a major enabler in areas such as artificial intelligence (AI), digitalisation and trust-related technologies. We look forward to working with the relevant agencies to learn more about these programmes and provide industry input on the key tech growth trends Singapore could redouble efforts on,” said Wong Wai Meng, Chair, SGTech.
Working parents
The Tripartite Standard on Flexi-Work Arrangements will become compulsory next year, Wong said, while paternity leave will be doubled. Government-paid paternity leave, currently lasting two weeks, will run for four weeks for eligible working fathers of Singaporean children born on or after 1 January 2024, Wong said. The extra two weeks will be given on a voluntary basis initially, with employers which grant the additional leave reimbursed by the government. Additionally, unpaid infant care leave for each parent in the child’s first two years, has also doubled from the current six days per year to 12 days per year.
Corporate tax
Wong also signalled his intention to implement Pillar 2 of BEPS 2.0 from 2025 as part of the broader international move to align minimum global corporate tax rates for large multinational enterprise (MNE) groups while caveating that the situation is fluid. Base erosion and profit shifting (BEPS) is a global plan to reform international taxation and ensure that multinational enterprises pay a fair share of tax wherever they operate. As of 4 November 2021, over 135 countries and jurisdictions have agreed to be part of the plan, which will introduce a global minimum effective tax rate of 15% for large MNE groups under Pillar 2.
"However, many jurisdictions have not announced their implementation plans. Some key parameters of Pillar 2 have only been finalised this year while others remain under discussion at the international level," he noted.
"When we do so, we will implement a domestic top-up tax, which will top up the MNE groups’ effective tax rate 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.
