One thing that set the 2022 budget apart from previous ones was its outline of a vision for post-pandemic Singapore reconstruction, even if Finance Minister Lawrence Wong did not express it in such grandiose terms.
Taxes and their impact on business figured prominently, underscoring the government’s watchful eye on global developments.
Proactively exploring a corporate tax supplement for multinational corporations to comply with global anti-base erosion rules puts our ecosystem in good stead, ahead of an impending global minimum tax rate that will begin to take shape next year.
Raising the country’s carbon tax rate to between S$50 and S$80 per tonne of emissions by 2030, up from the original estimate of S$10 to S$15 per tonne, aligns Singapore more closely on the rate recommended by the International Monetary Fund of 75 US dollars per ton.
The Budget 2022 workforce policy adjustment also built on themed initiatives introduced in recent years, including Tech.Pass, which was created to attract leading tech experts and entrepreneurs to the workforce. scale, as well as the Nongsa Digital Park initiative, which effectively secures a talent hinterland for Singapore.
The policy focus here has leaned toward developing an ecosystem of tech elites while tightening the supply of foreign workers at the lower end of the wage spectrum.
This calibrated response to the workforce must also be seen in the context of the government’s social investments in upskilling and redistributive policies, signaling the recognition that the country’s transition to a higher value-added economy and focused on innovation could lead to greater stratification without the appropriate budgetary measures. Support.
The sum of these and other policy initiatives announced in Budget 2022 signals an intention to move from a system that has been portrayed as low-tax and dependent on foreigners, to one aligned with international developments, supported by a higher value. more economical and more egalitarian in its redistribution measures.
As policymakers put in place the structures that will allow post-pandemic Singapore to thrive, there remain key policy and political challenges that need to be considered.
SUPPORTING AN AGING POPULATION
First, the absolute inexorability of our demographics and our ability to financially support an aging population.
Last year, for the first time since 1970, the number of citizens and residents recorded a year-on-year decrease, while the share of citizens aged 65 and over grew at a faster pace. faster than before.
Complicating the public funding required is the fact that our sovereign wealth funds are now operating in a low-return environment, calling into question the sustainability of high returns even with their long-term mandates.
This situation is compounded by the way the low-hanging fruit of population growth for itself has already been reaped.
What other ways to raise government revenue are now available to us?
Land ownership and the invention of new technologies have been great drivers of wealth over the past few decades, and the two intersect in the wild west of the metaverse without the compensating balance of unions and digital governments.
Regulators have encountered difficulties in converging on globally standardized tax treatments due to issues such as categorization, valuation and pseudo-anonymity.
India, for example, has imposed a 30% tax on profits from cryptocurrency investments, lending regulatory legitimacy to the asset as a taxable class, while controversially placing it on the same tax level as online betting.
As clarity on the appropriate regulatory treatment of digital assets develops over time, the future of digital assets as taxable property could also contribute to government spending.
MAINTAIN OUR CONNECTIVITY
Second, Singapore cannot avoid being deeply connected and integrated into world trade for the vitality of its economy.
But Singapore, the proverbial canary in the coal mine, is also home to a plethora of very diverse viewpoints.
These can range from concerns about competition with foreign talent, the type of concessions we should include in trade agreements, and even the type of diplomatic relations we should seek to establish or maintain with our regional neighbors.
These feature as key themes in the conversations I have had with global companies and investors in the course of my work.
The sustainability of supply chains and their compliance with established environmental, social and governance standards, the macro-environment around post-pandemic reopening and, more generally, how to price assets against headwinds and Political headwinds are just a few of the many concerns economic players have when considering whether to invest in this country.
In the coming years, policymakers will have to navigate an increasingly thin political tightrope characterized by the need to keep its economy open and connected, while responding to nativist sentiments heightened by the uneven impact of Covid-19 on different parts of the population.
A SENSE OF ROOTED
Third, tied to Singapore’s ability to attract and then retain the world’s best and brightest in a political environment with a global minimum tax rate, there is a need to further develop our non-financial incentives.
Our good reputation as a global connectivity hub, underpinned by several commercial agreements and physical infrastructure, strong industry-tertiary links, and backed by an efficient and transparent legal system, is unchallenged.
But as the country realizes its ambitions as a global city and becomes a hub for global talent, a debate about democratic participation in our commons will need to take place.
These are the “soft” materials that permeate the roots of a place.
Policymakers will increasingly have to arbitrate, for example, between censorship and artistic license, or be cosmopolitan without being subject to foreign influence.
They will need to allow technology to enable conversations without unduly privileging the views of digital influencers or worse, isolating non-digital segments of residents of an increasingly plural society.
Budget 2022 hinted at a vision of a post-pandemic Singapore that is globally connected and aware of international political developments.
The next steps in building this vision involve navigating tough policy choices around economic competitiveness, social protections, and democratic development that, if done right, will ensure a healthy economy, politics, and society.
ABOUT THE AUTHOR:
Andrew Yeo is Asia Practice Lead and Head of Singapore for Global Counsel, a public policy advisory firm.