Expect surplus; Family and business support

A small surplus of S$800 million is expected for FY2024, which runs from April 1, 2024 to March 31, 2025, Wong said.

The Southeast Asian country has a constitutional requirement that the government maintain a balanced budget during each parliamentary term – meaning it cannot run a deficit at the end of its term.

Singapore's next general election must be held by November 2025.

In his budget speech on Friday, Wong announced that the city-state would increase support for households and businesses as the country continues to grapple with rising prices.

The government will also offer more vouchers and cash grants to Singaporean households, as well as rebates on utility bills through a so-called guarantee package designed to help households cope with rising costs.

The total bill for these added household measures will amount to an additional S$1.9 billion.

Separately, Wong also announced that there will be a 50% personal income tax rebate for 2024, which will cost the government S$350 million.

“Let me assure everyone that we will always support you.”

Notably, Wong announced that Singapore will introduce a temporary financial support plan later this year for workers who have been laid off from their jobs.

This represents a shift for Singapore, which does not currently provide unemployment benefits to these workers and has long resisted such measures.

Workers who have their own jobs “will feel pressure to rush to the first available job they find” even if it's not a good fit for them, Wong explained.

Ideally, he said, these workers should consider upgrading their skills and finding jobs that suit their abilities and talents, but they may not have the means or time to do so, especially when they are trying to make ends meet.

The new scheme will help these workers as they undergo training or look for better jobs.

However, he cautioned that the program must be “carefully” designed to take into account the level, length and terms of financial support in order to “avoid the risks that other countries face when they provide unemployment benefits.”

Businesses in the city-state will also get more support amid rising business costs, Wong said, announcing a S$1.3 billion enterprise support package.

All companies in Singapore will receive a 50% corporate income tax rebate, up to a maximum of S$40,000.

Cash payouts of at least S$2,000 will also be given to companies that hire at least one local employee in 2023.

“The enhanced guarantee package and enterprise support package will provide some near-term relief to Singaporean households and businesses. They are needed during this period when inflation, although moderate, remains high,” Wong said.

“But they are not permanent solutions. In the long term, the best way to deal with inflation is to ensure that the productivity of our companies and workers increases, and that real incomes continue to rise sustainably.”

Singapore's headline inflation rate in December was 3.7% in December, having fallen steadily since its peak of 7.5% recorded in September 2022.

Core inflation – which does not include accommodation and private transport prices – is expected to slow to an average of 2.5% to 3.5% for 2024, the bank said. The Monetary Authority of Singapore expected.

Separately, Wong said Singapore would still need to attract investment. He announced a tax credit scheme for companies that make significant investments in the country in key areas that benefit Singapore.

This program is called the Refundable Investment Credit Plan, where the credits will be offset against the company's corporate income tax.

Any unused credits will be returned to the Company in cash within four years of meeting the conditions for receiving the credits.

Regarding corporate income tax, Wong said Singapore will implement two components under the second pillar of the BEPS 2.0 — or base erosion and profit shifting. It is an OECD project in which more than 140 jurisdictions have agreed to raise the minimum effective tax rate for large companies to 15%.

The two elements will be the income inclusion rule and the additional local tax. Both will come into effect for fiscal years beginning on or after January 1, 2025, and will apply to multinational corporate groups with global revenues of at least 750 million euros ($808.5 million) annually.

The IIR will tax the offshore profits of multinational corporate groups domiciled in Singapore at an effective tax rate of at least 15%, regardless of where they operate. The DTT agreement will subject these companies to a minimum effective tax rate of 15% on their profits in Singapore.

Wong said it was in Singapore's interest to implement a double taxation treaty so that the republic could collect the tax “instead of sending it elsewhere”.

However, corporate income tax in Singapore is currently 17% Some pay less than that As a result of tax breaks and incentives.

The European Union, the United Kingdom, Switzerland, Japan and Korea have said they will implement Pillar Two rules from 2024, while Hong Kong and Malaysia have announced plans to do so from 2025, he said.

“In the short term, implementing Pillar Two will provide additional revenues,” Wong said. “But it is uncertain how much this revenue will be or how long it will last.”

In fact, he said, Singapore may see a reduction in its tax base, if multinational companies shift their business activities to other jurisdictions as a result of these changes.