Singapore’s Budget 2020 faces global uncertainty head-on
On February 18th, Heng Swee Keat, Singapore’s Deputy Prime Minister and Minister for Finance, delivered the Singapore Budget 2020. This year’s budget plan, titled “Advancing as One Singapore”, comes at a trying time for the city with a slowing economy caused by the COVID-19 virus. Budget 2020 focuses on strategic ways to meet current challenges and develop a stronger and steadier Singapore during global uncertainty.
In this Pacific Prime Singapore article, we’ll take a closer look at the most exciting developments from Budget 2020 concerning businesses and Singaporeans.
Singapore Budget 2020 Highlights
In his longest speech as Finance Minister to date, Heng disclosed an SGD $83.6 billion budget for 2020 and a four-part plan that is intended to support and unify Singapore during current uncertainties. The rather large expenditure, which is a 7 percent increase from financial year (FY) 2019’s SGD $78.2 billion, comes as the Lion City tackles COVID-19 and long-term global issues such as a weakening economy and an aging population.
Protecting families and containing the spread of the latest coronavirus is the immediate concern, said Heng. A larger portion of the SGD $800 million that is set aside for dealing with COVID-19 will go to the Ministry of Health, in addition to the “substantial resources” already committed to public health annually.
Health concerns aside, Heng acknowledged that locals are understandably concerned about the impact the coronavirus will have on jobs and businesses.
Businesses get help
Workers and businesses affected by the COVID-19 outbreak can expect to receive help while additional relief will be given to the other sectors that have been hit hard by the pandemic. The Stabilization and Support Package will offer cash flow and job support so firms can retain and retrain employees. What’s more, extra measures will be introduced for the tourism, retail, aviation, food services, and transport services sectors, which have been directly impacted by the coronavirus.
Heng said that he would help workers stay employed and support businesses by covering their wage cost through the new Job Supports Scheme and the existing Wage Credit Scheme.
The new Jobs Support Scheme will make it easier for businesses to retain their local employees. The scheme involves offsetting 8 percent of wages for every Singapore citizen and permanent resident worker for a three-month period. This will have a monthly wage cap of SGD $3,600, and employers will receive payment by the end of July 2020.
With more than 1.9 million employees in Singapore, the Jobs Support Scheme will cost the Government SGD $1.3 billion. The existing Wage Credit Scheme will be enhanced as well, with the monthly wage ceiling increasing from SGD $4,000 to SGD $5,000 for qualifying wage raises given in 2019 and 2020.
Cash flow support for enterprises
Additionally, the package will offer economy-wide support to help businesses with cash flow. All tax-paying companies will receive a corporate income tax rebate. For the year of assessment 2020, the rebate will be given at a rate of 25 percent of tax payable. Capped at SGD $15,000 a company, the rebates are estimated to cost a total of $400 million.
According to Heng, several tax treatments under the corporate tax system will also be enhanced for one year. With enhancements such as faster write-down of investments, more cash will be put in the hands of Singaporean enterprises.
To make it easier for businesses to access work capital, the Enterprise Financing Scheme’s Working Capital Loan component will be enhanced for one year as well. The maximum loan quantum will be SGD $600,000, which is double the usual amount. The Government’s risk-share on loans will also increase from the existing 50-70 percent to 80 percent.
Moreover, tenants and lessees of properties from the Singapore Land Authority, the Housing Board or other government-managed properties can contact the agencies to discuss installment plans or other flexible rental payment options.
Additional support for several sectors
Several sectors will receive additional support since they have been directly impacted by the COVID-19 outbreak. These sectors include:
- Food services
- Point-to-point transport services
Thanks to redeployment programs, employers in these sectors will be able to retain and re-skill employees. Furthermore, the re-skilling funding period will be increased to a maximum of six months from the current three months.
Through the redeployment programs and Jobs Support Scheme, over 330,000 local workers are anticipated to be retained and retrained.
Postponing GST hike
When speaking about postponing the planned Goods and Service Tax (GST) increase from seven percent to nine percent until next year, Heng mentioned the decision was a result of the Government reviewing its revenue and expenditure projections, as well as the current economic state.
However, he noted that the GST hike will be required by 2025, after which the Assurance Package takes effect. Designed to provide more assistance to lower-income households, the package offers every adult Singaporean a cash payout of SGD $700 to $1,600 over a five-year period. The Government will also improve the permanent GST voucher scheme in order to offset different amounts of GST for different households.
“The COVID-19 outbreak is a stark reminder of the continued importance of maintaining a sound fiscal footing to deal with surprises and unexpected scenarios,” said Heng. In 2018, he announced the plan to raise the GST by two percentage points, reaching 9% between 2021 and 2025. The goal of this is to increase recurrent revenues to meet Singapore’s growing recurrent spending, especially for healthcare.
“Our ongoing fight against the COVID-19 outbreak is a testament to how we can work together, said Heng. He concluded the speech by saying, “Together, we will advance, as One Singapore.”
Why does the Singapore Budget 2020 matter to expats?
While the newest developments are good news for Singaporeans, many expats will only reap the benefits of some of the changes. In terms of healthcare, expats can use individual health insurance to close any gaps in healthcare that their status hinders them from. As the broker of choice for half a million clients across the globe and over 20 years of experience in the insurance industry, Pacific Prime can help you find private health insurance in Singapore, along with family health insurance, senior citizen health insurance, and more. Contact us to receive expert advice or a free quote today.
When she’s not writing, she’s likely searching for a new restaurant or cafe to try, reading or doing yoga.
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