SINGAPORE – Deputy Prime Minister and Minister for Finance Heng Swee Keat unveiled the Budget for fiscal year starting April 2020 to 31 March 2021 in Parliament on Tuesday (18 February) with sweeping measures to support the economy and Singaporeans amid the COVID-19 coronavirus outbreak.
“This year we usher in a new decade, one marked by tectonic shifts in our operating environment, and major uncertainties,” Heng said in his budget speech. “Just as the global economy was beginning to recover, the Coronavirus Disease 2019, or COVID-19, outbreak hit us.”
The budget plan comes after Singapore on Monday cut the 2020 GDP growth forecast to between -0.5 per cent and 1.5 per cent, with the figure likely to fall around the mid-point of 0.5 per cent. It had expected growth of 0.5 to 2.5 per cent in November.
Heng said Singapore “must be prepared that the economic impact may be worse than we projected”.
The following are some highlights of the proposals for Budget 2020.
To deal with the near-term economic challenge, the government has set aside an additional $800 million to support efforts to fight and contain the outbreak, with the bulk of it going to the Ministry of Health, and unveiled two packages totalling $5.6 billion to help consumers and businesses.
The $4 billion Stabilisation and Support Package will help stabilise the economy and support workers and companies, by helping workers to stay in their jobs and companies facing cash flow issues. The ministry will also give additional help to sectors more directly affected by the outbreak.
As part of this package, the government will support companies by defraying their wage costs through two schemes – the Jobs Support Scheme to help retain workers by offsetting 8 per cent of the wages up to a monthly cap of $3,600 for three months, and the Wage Credit Scheme to support wage increases for employees.
Under the latter scheme, the monthly wage ceiling will be raised from $4,000 to $5,000 for qualifying wage increases in 2019 and 2020. The government’s co-funding levels will be increased by five percentage points to 20 per cent for 2019 and 15 per cent for 2020.
The five sectors most directly hit by the COVID-19 outbreak - tourism, aviation, retail, food services and point-to-point transport services - will get additional support. The measures include a property tax rebate of 30 per cent this year for the accommodation and function room components of licensed hotels and serviced apartments, and Meetings, Incentives, Conventions and Exhibitions (MICE) venues. Firms in the tourism sector can also look forward to a temporary bridging loan programme for additional cash flow support.
International cruise and regional ferry terminals will receive a 15 per cent property tax rebate, while the two integrated resorts will receive a 10 per cent rebate. Changi Airport will also be granted a 15 per cent property tax rebate.
To support firms in the food services and retail business, the National Environment Agency (NEA) will provide a full month's rental waiver to stallholders in NEA-managed hawker centres and markets, while the Housing & Development Board (HDB) will provide half a month of rental waiver to its commercial tenants.
The second economic package is the Care and Support Package to help households with their expenses, totalling $1.6 billion. This is on top of measures introduced in every Budget to support families.
Under the $1.6 billion Care and Support Package, all Singaporeans aged 21 and above this year will receive a one-off cash payout of $300, $200 or $100, depending on their income. Cash payouts will also be given to families with children and elderly parents.
Every Singaporean with a child aged 20 and below will receive another $100 cash payout, while Singaporeans aged 50 years and above will receive a $100 PAssion Card top-up.
All eligible HDB households will get double their regular GST Voucher-U-Save rebate in financial year 2020, through a one-off special payment. The Service and Conservancy Charges Rebate will be extended by another year. Eligible households will receive rebates to offset between 1.5 and 3.5 months of these charges.
Grocery vouchers of $100 will also be given out to needy Singapore in 2020 and 2021, to be used at major supermarkets.
Self-help groups will receive a $10 million grant over two years, while community development councils will receive $20 million.
The planned increase in the Goods and Services Tax (GST) will not take place in 2021, in the wake of the COVID-19 outbreak. The GST rise had been planned to be rolled out between 2021 and 2025.
When the eventual increase comes, it will be accompanied by a $6 billion Assurance Package to cushion the increase for Singaporeans. Under the package, most Singaporean households will receive offsets to cover at least five years’ worth of additional GST expenses incurred.
More will be doled out to lower-income households: those living in 1 to 3-room HDB flats will receive offsets equivalent to 10 years’ worth of additional GST expenses incurred.
Every adult Singaporean will receive a cash payout of $700 to $1,600 over five years.
For example, a family of four with a combined income of $6,000 living in a 4-room HDB flat can receive a total of about $7,000 in offsets over five years, including cash of about $4,000.
In Budget 2020, Heng is also preparing Singaporeans to meet the challenges and seize opportunities to transform Singapore for the long term.
He has identified four areas:
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To grow the economy, transform industries and create opportunities.
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Build an inclusive, caring society for all.
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Build a liveable and sustainable Singapore.
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Mobilise Singaporeans to work together to build a nation that they can call home.
There will be a one-off SkillsFuture Credit top-up of $500 for every Singaporean aged 25 years and above. The top-up can be used from 1 October and will expire by end-2025.
There will also be a new SkillsFuture Enterprise Credit to encourage employers to embark on the transformation of their workforce and enterprise. They can use this credit to defray 90 per cent of out-of-pocket costs of business transformation, job redesign and skills upgrading.
Each enterprise will get $10,000 in SkillsFuture Enterprise Credit - most of the beneficiaries will be small and medium enterprises.
The government will also introduce a new SkillsFuture Mid-Career Support Package for locals in their 40s and 50s. The objective is to double the annual job placement of locals in their 40s and 50s to around 5,500 by 2025.
For Singaporeans aged 40-60, there will be a special SkillsFuture Credit top-up of $500. This will be above the top-up that was announced previously.
This additional credit, which will expire in five years, can be used for selected reskilling programmes at Continuing Education and Training Centres.
To help employers and workers, the government will introduce a Senior Worker Support Package comprising four measures, including grants and wage offsets to encourage employers to hire senior workers.
The S Pass in sub-dependency ratio ceiling (DRC) of three sectors will be cut from 20 to 15 per cent: construction, marine shipyard, and process. The DRC refers to the maximum proportion of foreign workers that a company can hire.
This will be done in two stages — from 20 per cent to 18 per cent on 1 January, 2021 and down to 15 per cent on 1 January, 2023.
The foreign worker levy rates for all sectors will be maintained for 2020.
The government will increase the share of government-supported pre-school places to 80 per cent by about 2025.
Two years ago, the government spent about $1 billion on the early childhood sector. Within the next few years, this will double to over $2 billion per year.
The CPF Basic Retirement Sum (BRS) will be adjusted further, in line with rising income levels.
The BRS is currently $90,500 for the cohort turning 55 in 2020. It will be adjusted by 3 per cent per year for the next two cohorts.
Heng expects 7 in 10 actively employed persons from these two cohorts to be able to set aside their BRS, more than the 4 in 10 about a decade ago.
To help those with less CPF savings to save more, there will be a Matched Retirement Savings Scheme from 2021 to 2025.
Lower- to middle-income Singaporeans aged 55 to 70 who have not been able to set aside the prevailing BRS will be eligible. The Government will match every dollar of cash top-up made to their CPF Retirement Account, up to an annual cap of $600.
Separately, there will also be a top-up of three funds that provide targeted help for the elderly and the lower-income.
The ElderCare Fund will receive $750 million, the ComCare Fund $500 million and MediFund $200 million.
Singapore will commit close to $1 billion for research in urban solutions and sustainability.
The government will progressively phase out the use of vehicles with internal combustion engines (ICE) and move towards greener vehicles such as hybrids and electric vehicles (EVs) by 2040.
One way is via the EV early adoption incentive. Those who purchase fully electric cars and taxis will receive a rebate of up to 45 per cent on the additional registration fee, capped at $20,000. This will be implemented for three years, from January next year.
Public charging infrastructure for EVs will be enhanced. There are about 1,600 charging points islandwide now. By 2030, the government aims to deploy up to 28,000 chargers.
The government expects an overall budget deficit of $10.9 billion, or 2.1 per cent of GDP, for fiscal 2020 as Singapore plans for a “more expansionary” budget to give its economy a boost amid near-term uncertainties.
There is no draw on past reserves.
Here are some updates and highlights:
Budget 2020: $5.6B packages to help alleviate economic slowdown
Budget 2020: GST increase will not take place in 2021
Budget 2020: SkillsFuture expansion to aid Singaporeans' development
Budget 2020: $8.3 billion for economic transformation and growth
Budget 2020: S Pass ratio to be reduced to 15% for 3 sectors
Budget 2020: $1.6 billion package to help Singaporeans amid economic slowdown
Budget 2020: All vehicles to run on cleaner energy by 2040
Budget 2020: $5 billion fund for Singapore to combat rising sea levels
Budget 2020: Overall budget deficit of $10.9b expected for FY2020
Budget 2020: More support for needy students and pre-schools
Get news, updates and analysis on #sgbudget2020 on Yahoo Finance: https://yhoo.it/2SwkjHO
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Budget 2020: Tax rebates, wage support and cost of living package among measures amid COVID-19 outbreak — Heng Swee Keat
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