Singapore’s 2020 Budget: Salient Features
- On February 18, 2020, Singapore unveiled its 2020 budget, which focused on providing short-term financial support to businesses impacted by the coronavirus outbreak.
- The government will also target technology, innovation, and entrepreneurship as particular areas of growth, with a vision to transform Singapore into a ‘Global-Asia node of technology, enterprise, and innovation’.
- The government will also provide support in the form of tax rebates and loans for SMEs.
On February 18, 2020, Singapore announced its 2020 budget, which focused on providing short-term support for businesses impacted by the Covid-19 outbreak in addition to targeting technology, innovation, and entrepreneurship as lead areas of growth.
The budget also placed emphasis on developing local human resources by providing financial assistance to individuals and corporations for retraining and upskilling. This is part of the government’s vision to transform Singapore into a ‘Global-Asia node of technology, enterprise, and innovation’.Singapore’s economy experienced growth of 0.7 percent in 2019, the weakest since the 2008 global financial crisis. Total expenditure for 2020 is expected to reach S$83 billion (US$59 billion), an increase of seven percent from last year and is forecast to result in a budget deficit of S$10.9 billion (US$7.7 billion) – the highest in 10 years.
A large portion of the budget has been allocated to healthcare, public transport, and national development.
Covid-19 support package
The ongoing Covid-19 outbreak has forced Singapore to cut its growth forecast for 2020 to between -0.5 percent and 1.5 percent. The country has reported one of the highest numbers of infections outside China with 85 cases as of February 21.
The government has pledged S$800 million (US$570 million) to contain the spread of the virus. A majority of this fund will be directed to the Ministry of Health and help support frontline medical officers.
Stabilization and support package
This package is aimed at supporting businesses with their short-term cash flow problems and to keep local workers in employment.
The government will provide S$4 billion (US$2.8 billion) in assistance through two schemes:
- Jobs support scheme – the government will offset eight percent of wages up to a monthly wage cap of S$3,600 (US$2,500) for the next three months; and
- Enhance the wage credit scheme – this scheme currently co-funds 15 percent of wage increases for employees earning a gross monthly wage of S4,000 (US$(US$2,800). The government will raise the co-funding level to 15 percent for 2020 (from 10 percent) as well as the monthly wage ceiling to S$5,000 (US$3,500).
Corporate income tax rebate
The package will provide corporate income tax rebate for the 2020 financial year at a rate of 25 percent and capped at S$15,000 (US$10,700) per company.
Small and medium-sized enterprises (SMEs) employ some 72 percent of the country’s workforce. The government will raise the maximum loan quantum from S$300,000 (US$214,000) to S$600,000 (US$428,000) and increase the risk-share on these loans from the current 50-70 percent level to 80 percent.
No increase in GST
The government will not increase its goods and services tax (GST) for 2021. The rate will remain at seven percent with the government preparing S$6 billion (US$4.2 billion) to cushion the impact of GST increases in 2025.
Support for specific business sectors
The industries directly impacted from this outbreak have been manufacturing and wholesale trade as Singapore’s major demand market includes China – since the inception of a free trade agreement (FTA), China has become Singapore’s largest trading partner.
Furthermore, the tourism and transport sectors have been badly affected due to a sharp fall in the number of tourists, particularly from China.
In addressing these issues, the government will aim to reskill more than 330,000 local workers through the Redeployment Program in the tourism, aviation, food services, and retail sectors. Other forms of support include:
- Granting a property tax rebate of 30 percent for 2020 for the accommodation and function room components of Meetings, Incentives, Conventions, and Exhibitions (MICE) venues;
- Regional ferry terminals and international cruises will receive a 15 percent property tax rebate. Integrated resorts will receive a 10 percent tax rebate;
- Providing up to S$1 million (US$714,000) in loans for enterprises in the tourism sector with an interest rate capped at five percent. The government will take 80 percent of the risk of the total loan;
- Changi International Airport will receive a 15 percent property tax rebate;
- Further rebates on aircraft landing and parking charges, and rental rebates for shops and cargo companies at Changi Airport;
- Full month rental waiver to stallholders located in National Environment Agency (NEA) managed markets;
- A 15 percent tax property rebate for selected commercial properties; and
- Providing an S$55 million (US$39 million) package to support taxi drivers and private-hire drivers.
Transformation and growth package
To enable Singapore to grow and transform its economy, the government has prepared S$8.3 billion (US$5.9 billion) in funding over the next three years. The government will focus on three main areas:
Enabling stronger partnerships
The government aims to develop and expand its network of economic linkages through new FTAs and double tax agreements (DTAs) with international partners. The government recently signed an updated DTA with Indonesia.
Deepening enterprise capabilities
This aspect of the package is aimed at supporting the capabilities of Singaporean businesses from startup to growth by adopting digitalization, new innovation, and accessing new markets overseas.
Developing local human resources (SkillsFuture Enhancement)The government will develop local human resources through its SkillsFuture program. The program will assist individuals in gaining new skills (SkillsFuture), enhance the role of businesses in developing their staff (SkillsFuture Enterprise), and support mid-career workers to help them stay employed (SkillsFuture Mid-Career).
Under the individual program Singaporeans aged 25 and above can receive up to S$500 (US$356) in SkillsFuture Credit top-up. This top-up will be available from October 1, 2020, and expires at the end of 2025 and is designed to encourage Singaporeans to reskill and upskill.
Through this program, businesses are given S$10,000 (US$7,134) to cover 90 percent of out-of-pocket expenses like skills training and job redesign. The government hopes this grant will benefit 25,000 SMEs in the country.
SkillsFuture Mid-Career Package
This program aims to assist workers aged between 40-60 years to remain employable and be able to access good jobs.
The government will cover up to 20 percent of the worker’s salary for six months, capped at S$6,000 (US$4,280). Eligible candidates can choose from over 200 career transition programs offered by the Continuing Education and Training (CET) Centers.
Care and support package for households
Under this package, the government will allocate S$1.6 billion (US$1.1 billion) to help Singaporeans cover household expenses during the current economic uncertainty. This includes:
- One-Off cash payment to of S$300 (US$214), S$200 (US$142), and S$100 (US$72) to all Singaporeans over the age of 21 depending on their income;
- The GST-voucher U-Save rebates will be doubled through a one-off special payment. The u-save rebates help lower-income families offset part of their utility’s bills;
- Singaporeans on workfare will receive an additional 20 percent of their income. This is in addition to an S$100 (US$72) in cash payment; and
- Lower-income households will receive grocery vouchers of S$100 (US$72) in 2020 and 2021.