By Francis Kan
SINGAPORE — Faced with the economic fallout of the ongoing COVID-19 crisis, Budget 2020, delivered by Deputy Prime Minister and Finance Minister Heng Swee Keat on Tuesday (18 February), was one of the most anticipated in recent years.
Businesses, workers and households would have been cheered by the more than S$5 billion set aside in this year’s budget to support them amid a virus outbreak that prompted the government to slash its 2020 GDP growth forecast to between -0.5 per cent and 1.5 percent, from 0.5 per cent to 2.5 per cent previously.
“The special package of S$5.6 billion announced is many folds higher compared to the support provided by the government during SARS. This would help to address both the current crisis caused by the COVID-19 virus as well as potential downturn which will be caused by lower GDP growth,” said Ajay Kumar Sanganeria, Deputy Head of Tax, KPMG in Singapore.
Beyond near-term relief efforts, the government has not taken its eye off the horizon. Mr Heng announced measures that will continue efforts to transform the economy, to maintain Singapore’s competitiveness in a shifting global landscape, and position it for a rebound. Among other initiatives, this includes an Enterprise Transform Package that will support efforts to groom business leaders.
“This Budget provides needed short-term help to businesses and households to ride the current economic difficulty without taking focus away from the need to build the country’s capacity and develop the potential of Singaporeans to secure our future,” noted Chai Sui Fun, Partner, International Tax and Transaction Services at Ernst & Young Solutions LLP.
To finance this highly expansionary budget, Mr Heng forecasted a deficit of S$10.9 billion for FY 2020 – the highest shortfall in a decade – funded entirely from reserves accumulated during the government’s current term. As such, there is no need to tap into past reserves.
Here’s a look at the big winners of Budget 2020 and the few who made off less well.
The Stabilisation and Support Package
Unsurprisingly, businesses were the big winners in this year’s Budget, as the government sought to help cushion the blow from COVID-19. Tourism and transport-related sectors hardest hit by the outbreak were also singled out for additional assistance. Near-term support for businesses came mainly in the form of the S$4 billion Stabilisation and Support Package that aims to keep workers in jobs and help companies with their cash flow.
While lauding the overall support package, Singapore Business Federation (SBF) chairman S.S. Teo would have liked for the government to address “the knock-on effects of COVID-19 on other industries and the larger companies that are also badly affected.” He added: “If and when the situation worsens, we are confident that the government will be agile in rolling out more support.”
Help with Cash Flow
To help ease cash flow problems, all tax-paying companies will receive a corporate income tax rebate of 25 per cent of tax payable for the year of assessment 2020. The rebates will be capped at S$15,000 per company.
Businesses can also access capital through the Enterprise Financing Scheme's Working Capital Loan. The maximum loan quantum will be doubled to S$600,000, while the government's risk-share on the loans will be raised to 80 per cent, from 50 per cent to 70 per cent currently. Meanwhile, tenants and lessees of government-managed properties can approach the relevant government agencies to discuss options for more flexible rental payments.
The tourism, aviation, retail, food services, and point-to-point transport services sectors directly affected by COVID-19 received additional assistance in the form of support to redeploy and reskill workers, tax and other rebates, access to bridging loans, and rental waivers, among other measures.
“The measures announced in Budget 2020 to help the tourism sector with operating costs and cash flow are timely and good short-term initiatives. These measures, particularly the property tax rebates and temporary bridging loans, will no doubt help with fixed costs and working capital of the businesses,” said Govinda Singh, Executive Director of Valuation and Advisory Services, Colliers International.
Transform and Grow
Beyond the immediate support offered by the Stabilisation and Support Package, the government has also allocated S$8.3 billion over the next three years to spur businesses to transform and grow by enabling stronger partnerships, deepening enterprise capabilities, and developing people. The funds will help support initiatives such as the new Enterprise Leadership for Transformation Programme that aims to groom the business leaders of 900 companies over the next three years.
SBF CEO Ho Meng Kit said that Budget 2020’s investment on innovation and deepening enterprise capability offered companies a chance to turn crisis into opportunity, but encouraged companies to play their part. “We urge companies to embrace the technology incentives introduced in Budget 2020 and continue to invest in manpower planning, capability building, and change management as part of their digital strategy. This is key to generating long-term value,” he said.
Jobs Support Scheme
The Stabilisation and Support Package features a Jobs Support Scheme that will help businesses retain their local workers by offsetting 8 per cent of wages for every local worker employed, for three months. The scheme will be capped at S$3,600 a month, with employers to be paid by the end of July 2020.
Enhanced Wage Credit Scheme
The government’s existing Wage Credit Scheme, which co-funds wage increases for Singaporean employees earning a gross monthly wage of up to S$4,000, will see its monthly wage ceiling raised from S$4,000 to S$5,000 for qualifying wage increases given in 2019 and 2020. .
SkillsFuture Credit top-ups
Mid-career workers in their 40s and 50s will receive S$1,000 in SkillsFuture Credit this year to help them acquire new skills to stay relevant in the workforce. All Singaporeans aged 25 and older will receive a top-up of S$500, while an additional top-up of S$500 will be given to those aged 40 to 60 as at Dec 31 this year. The additional credit can be used from Oct 1 this year, and will expire on Dec 31, 2025.
The government will provide a 20 per cent salary support to employers who hire local job seekers aged 40 and above through professional conversion programmes, place-and-train programmes for rank-and-file workers, and career transition programmes by CET centres. This incentive will be given for six months and is capped at S$6,000.
FRONT LINE AGENCIES
Some S$800 million will be set aside to support agencies that are on the front line of fighting the COVID-19 outbreak, with the lion’s share going to the Ministry of Health.
Care and Support Package
With economic growth expected to slow this year, households were also given short-term financial support to help tide them over this uncertain period. A S$1.6 billion Care and Support Package was announced to help with cost of living expenses.
The highlight of the package is a one-off cash payout of between S$100 and S$300 for all Singaporeans aged 21 and older this year, depending on income. Parents with at least one Singaporean child aged 20 and younger will each receive an additional S$100 in cash.
The government will also extend the Service and Conservancy Charges (S&CC) rebate of between 1.5 and 3.5 months by another year, and double the U-Save rebate for utilities expenses that eligible HDB dwellers get via a one-off goods and services tax (GST) voucher.
To further ease the financial burden on households, the planned GST increase from 7 per cent to 9 per cent, first announced in 2018, will not come into force next year.
Some S$6 billion has also been set aside this year to help cushion the impact when the GST increase does kick in. All adult Singaporeans will receive cash payouts of between S$700 and S$1,600 over five years to offset the additional GST expenses. The government will also continue to absorb GST on publicly-subsidised healthcare and education.
A Matched Retirement Savings Scheme will be introduced to help senior citizens who have not managed to accumulate the Basic Retirement Sum (BRS) in their CPF accounts. The government will match every dollar of cash top-up to their CPF Retirement Accounts, with an annual cap of S$600. This will affect around 435,000 Singaporeans aged 55 to 70.
More Singaporean students from institutes of higher learning will have the opportunity to go overseas: the government aims for 70 per cent of them to gain international exposure, up from about 50% per centcurrently. The new Asia-Ready Exposure Programme will help young Singaporeans visit cities in ASEAN, China, or India.
Coastal and flood protection fund
A new fund with an initial injection of S$5 billion will be set up to help protect Singapore against rising sea levels caused by climate change.
To promote sustainable living, the Housing Board (HDB) will roll out the HDB Green Towns Programme designed to reduce energy consumption, recycle rainwater and cool HDB towns. Meanwhile, lower-income households will be given incentives to help with the cost of buying energy-efficient household appliances.
Promoting electric vehicles
Several initiatives will be introduced to make electric vehicles (EVs) more attractive from next year. For instance, an early-adoption incentive scheme will be rolled out to EV buyers from 2021 to 2023, offering rebates capped at S$20,000 per vehicle. The road tax for EVs and some hybrids will also be revised to be less punitive. To further encourage EV adoption, Singapore will expand its EV charging infrastructure from 1,600 points now to 28,000 by 2030.
In a big-spending budget like this one, there are not many losers. Employers in the construction, marine shipyard and process industries were among the few. The foreign worker quota, or Dependency Ratio Ceiling (DRC), for S Pass workers in these sectors will be cut in two phases. The first cut will be from 20 per cent to 18 per cent on Jan 1, 2021, and the second, to 15 per cent on Jan 1, 2023. S Pass workers refer to mid-skilled foreigners earning at least S$2,400 a month.
While the cuts may be unwelcome news for the business community, SBF noted that the move is “aligned with the government’s efforts in the past years to manage manpower growth and encourage our enterprises to restructure and reskill local workers”.
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