Economy

Alyssa Divina

, Singapore

Published:

6 years ago

Singapore Budget 2020 Full Coverage: COVID-hit sectors to get $4b and GST hike moved to 2025

The budget deficit could hit $5.1b in 2020, the government injects $1.6b into the CPF Housing Grant, and $1b gets pumped into cybersecurity measures.

ADDRESSING SOCIAL CHALLENGES

Our Singapore Fund (OSF)
- Nearly $4.3m has been committed to support ground-up projects for culture, heritage, arts, and sports
- $250m to be set aside for greater movement to partnership efforts
- Extend OSF beyond 2020 to support more ground-up initiatives
Issued National Innovation Challenges to date
- AI-enabled healthcare, ageing, energy, urban mobility, etc.
Government to address more specific challenges to encourage ground-up participation
- Challenges in the social sector to support youth mental wellbeing amongst other things.

FISCAL STRATEGY

Ongoing discussion to revise international tax rules under the Base Erosion and Profit Shifting (BEPS) project
Singapore is one of the countries with triple AAA credit rating
The government will set aside an Assurance Package for GST
- Today, the net investment return contributions from our reserve is the biggest component of our revenue."
Singapore budget deficit
- For FY2019, Singapore government expects an overall budget deficit of $1.7b, or 0.3% of GDP.
  - This deficit is $1.8b lower than the $3.5b deficit forecasted a year ago
- For 2020: "We expect a basic deficit of $5.1b or 1% of the GDP"

CYBERSECURITY

"Diplomacy and deterrence are the twin pillars of SG sovereignty."
SGSecure Movement
Cybersecurity Agency (CSA) (2015) and passing of Cybersecurity Act in 2018
CSA preparing more measures for the next-level of cybersecurity
The government will set aside $1b over the next three years to build up country’s cybersecurity and data security capabilities

CLIMATE CHANGE

Manage greenhouse gas emissions
- Carbon tax introduced in 2019
- Enhanced minimal energy performance tenders
- Domestic transport sector: Significant carbon gas emissions
Progressively phase out the use of internal combustion (ICE) vehicles
- Set a long-term strategy goal to achieve this
- All vehicles must have cleaner energy by 2040
3 measures for ICE vehicles phase-out:
- 1. Enhance incentive to encourage adoption of cleaner vehicles
  - Commercial Vehicle Emissions Scheme
    - For light vehicles, announce details at COS
  - Cars and taxis: Additional EV Early Adoption Incentive
    - Those who purchase EV will receive rebates of up to 45%
    - Fully electric car: Rebate of up to 45% on the Add’l registration fee capped at $20,000
    - From January 2021: Across the board reduction for road tax for EVs and hybrids
- 2. Revise road tax methodology for cars
  - Extend public charging infrastructure for EVs
  - Expand EV charging infrastructure: About 1,600 currently
  - By 2030: Up to 28,000 chargers at public chargers islandwide
- 3. Procure cleaner vehicles
  - Mileage tax: To discourage excessive driving and reduce road congestion
  - Update vehicular tax structure to preserve such considerations
  - Usage-based tax on EVs as an alternative to fewer excise duties
  - In the interim, a lump sum tax will be imposed to be built in road tax schedule of EVs to partly account for loss of fuel excise duties
    - Phase in starting Jan 2021 for over 30 years
    - Full quantum implemented by Jan 2023
    - EV buyers can expect to enjoy substantial cost savings

Energy efficiency measures
- Households encouraged to purchase energy-efficient household appliances
- Incentives to help lower income household with the cost of this appliances
Newer housing developments will have 45-60% green cover
More than 36,000 gardening enthusiasts are nurturing over 1,500 community gardens island-wide
New HDB Green Towns Programme
- Key focus areas: reduce energy consumption, recycle rainwater, cool HDB homes/towns
Combatting rising sea levels
- Elaborate plans at the Committee of Supply Debate (COS)
- Climate change adaptation may cause $100b or more over 100 years
- Coastal and flood protection fund, with an initial injection of $5b, will be topped-up subsequently.

ENABLING EMPLOYMENT CRE (EEC)

Will replace Special Employment Credit (SEC) and Additional Special Employment credit (ASEC)
Available from 2021 to 2025
Cost of $31m/year
The government will review the EEC after two years and make necessary adjustments
Top up 3 funds that provide competent help for the elderly and lower income
- $750m for Elder Care fund
- $500m for the ComCare fund
- $200m to the MediFund

Ministry of Social Family Development and National Council of Social Service will develop the Community Capability Trust

Enhance capabilities and capacities of Social Service Agencies
$200m provided to the trust in FY2020
$150m matching
Commit $350m in the community capability trust in the next 10 years

AGEING POPULATION

650 active ageing programmes to engage seniors
Household income per capita, risen 4.1% per year in nominal terms
Basic Retirement Sum (BRS) increase: $90,500 for cohort turning 55 this year
Continue adjusting the BRS for the same 3% every year; $93,000 for cohorts turning 55 in 2021; $96,000 in 2022
Seven in 10 actively employed persons from these two cohorts expected to be able to set aside their BRS
Enhancing the Silver housing bonus and lease buyback scheme
- Provide risk free interest rates on their savings
- In 2019, such voluntary cash top-ups added up to about $1b
For those with less CPF
- Matched retirement saving scheme from 2021-2025
- For eligible Singaporeans aged 55-70
- Not set aside their BRS
- The government will match every dollar of cash top up to an annual cap of $600
- About 435,000 Singaporeans will be eligible
Silver Support Scheme
- Silver support currency: Bottom 20% of Singaporeans aged 65 and above
- Raise quarterly cash payout by 20%
- Smaller flats: From $750 to $900 per quarter
- Broader eligibility criteria and new payout tier to cover those $1,300 but not exceeding $1,800

ENHANCED CPF HOUSING GRANT

In 2019:
- First-time flat buyers, up to $160,000 in housing grants
- Income ceilings for subsidised flats and executive condo were raised to $14,000 and $16,000
- Expect around 16,000 HDB households to benefit each year
For 2020:
- Government will provide comprehensive care and support package amounting to $1.6b
- One-off cash payout of $300, $200 or $100, depending on income for Singaporeans aged 21 and above
- Double rebates to a one-off GST voucher, U-Save special payment to all eligible HDB households
- Extend a service and conservancy rebate by another year, receive rebates between 1 ½ and 3 ½ months of S&CC charges
Lower-income Singaporeans will receive:
- Grocery vouchers worth $100 each year in 2020 and 2021 for use in major supermarkets
- A further $100 cash payout with at least one Singaporean child aged 20 and below
- Additional GST voucher for larger households with five or more members
- Larger household can receive 2.5 times more than the regular rebates this year and receive up to $1,000
$100 top-up to the Passion Card to all Singaporeans aged 50 above this year
- Those who don’t have card can receive one for free
For self-help groups: Provide $10m grant over two years to help more families
- Community development councils
- Each CDC has a set of local assistance schemes
- Provide $20m to CDCs (Community Dev’t Councils) to do more
Care and support package for families will be at $1,300
- A three-generation family can receive above $1,800

EDUCATION

Enhanced preschool subsidies will be made available to more families this year
Increased government support to preschool places: From 50% today to 80% by 2025
Doubling support for young and preschool years
- 2018: spent about $1b on early childhood sector
- Within next two years, will double to over $2b per year
Secondary school
- Lower income families: Enhance the MOE financial assistance scheme
- Pre-university system: From $900 to $1,000
Bursary for full-time ITE students for AY 2020
- Lower income tier: 100% fee subsidies on top of the cash bursary
- Lower and middle income: Cash bursary quantum increased by $200/year
- Cost of bursaries for higher education will rise from $148m/year to $198m/year
A Singaporean child will receive $180,000 in total by the time he turns 16
- This includes $50,000 in government subsidies over 5 years

SOCI2010-2019: Healthcare expenditure tripled from $4b to $12b per year
Education: From $10b to about $13b
National developments: From $2.4b to $3.6b with the bulk going to subsidies in public housing
Gave out $1.1b dollars in cash to Singaporeans who need more help

FOREIGN WORKERS

Concerns on S-Passes
- Holders from construction, manufacturing, marine shipyard sectors growing by 3.8% per year over the last 2 years
- Can increase over the next 2 years as sector recovers
- "S-passes should not be a means for firms to hire low-cost foreign workers when qualified locals are available."
Cuts for dependency ratio ceilings for the services sector
- Starting 1 January 2020, the DRC for the services sector will be reduced to 38% from 40%, and cut further to 35% from 1 January 2021
For 2020
- Reduce S-Pass sub-DRCs in construction, marine, shipyard sectors from 20% to 15% from 1 January 2021 to 1 January 2023
- Tighten S-Pass sub-DRCs for manufacturing sector as well
Lean Enterprise Development Scheme
- Maintain foreign worker levy rates for 2020 (2019 data: $300 for higher-skilled workers and $450 for basic-skilled workers)

RETIREMENT AND REEMPLOYMENT

Raised CPF contribution for those 55-70 years old
To ease these changes: Senior Support Package is introduced comprising four measures:
- Senior employment credit, take effect by 2021
- When employer CPF contribution rates go up: we will provide employer with CPF offset by half of contribution
- Senior worker early adapter grant
- Part-time reemployment grant
Wage offsets in employing Singaporean workers 55 and above

MID-CAREER WORKERS

Some workers in 40s and 50s have not changed jobs since leaving school or upskilled
Now facing greater competition from younger workers and overseas
Broader global shifts: Exciting jobs will emerge
New Skills Future MidCareer Support Package
- Locals in 40s and 50s
- To help them stay employable, move on to new jobs
- Double annual local job placement to around 5,500 by year 2025
Reskilling programmes
For each eligible worker: Provide 20% salary support to employer for 6 months, $6,000 in total
- Improve access to reskilling programme
- $500 dollars special SkillsFuture credit for Singaporeans in 2020
- Credit will expire in five years to encourage early action

ENHANCING ROLES OF ENTERPRISES

1) Introduce a SkillsFuture Enterprise Credit - Embark in the transformation of workforce

90% of out-of-pocket costs of business transformation, job redesign and skills training
$10,000 per enterprise
Benefit 35,000 enterprises, most of which are SMEs

2) Productivity solutions grant

More support for job redesign services
o Pre-approved digital solutions and equipment
o Job redesign consultancy services

3) Work with large anchor enterprisers

Help the skills of workers in SMEs
Aims to partner up to 40 of such anchor enterprises to benefit 4,000 SMEs in the next 5 years

4) Institutes of Higher Learning (IHLs) work with more enterprises through SkillsFuture Work-Study Programme

Double capacity by 2026
Make this the mainstream pathway, with 12% of each cohort going through these pathways, up from 3.5% today

5) Working with Nanyang Polytechnic National Centre of Excellence

Deepen workplace learning capabilities

One-off SkillsFuture credit top-up is proposed

$500 for every Singaporean aged 25 years and above
Starts from 1 October 2020
Will expire in five years, ending in 2025

SkillsFuture Movement

5 years after launch: Training participate rates rose to 49% in 2019 from 35% in 2015
End-2019: Helped more than half a million Singaporean pick up new skills and develop new developments
Three elements to further support SkillsFuture
- Enabling the individual
- Enhancing the role of enterprises in developing their staff
- Special focus on mid-career workers

DEVELOPING LOCAL TALENT

Study trips
Set ourselves 70% of local IHL graduates to have overseas experience
- 70% of this group to have exposure to ASEAN, China, India
New Asia-ready Exposure Programme
Internships: Global Ready Talent Programme

Enterprise Transformation Package

Launch Enterprise for the Leadership Transformation Programme for Promising SMEs
Over next 3 years: Support leaders of 900 enterprises
Collaboration between banks and institutes for higher learning
Continue to broaden transformation to the Enterprise Development Grant in FY2020
- Support about 3,000 projects through the EGD in FY2020
- This will increase by 10%

Beyond Startups

SMEs Go Digital programme
- Gold business platform: Single touch point for enterprises to transact with the government digitally
- Expand to all 23 ITM sectors
- Access to pre-approved digital solutions
Markets Readiness Assistance Grant
Enhance market readiness assistance grants
Expanding support package (FTA consultancy)

Startups Ecosystem

3,800 tech startups in Singapore
150 VC funds investing in startups here and in the region
Ranked in the top 15 globally
StartupSG helps startups get their ideas off the ground
- Holistic support through: Co-investments, Mentorship, Fiscal space
Startup SG equity
- Catalysed $560m in private sector funding over the past 4 years
- Improve support for deep tech startups (including advanced manufacturing, agritech)
- $300m will be set aside under the startup SG equity
- More equity over the next ten years

Enhance for Trade Associations and Chambers (TACs) to scale and raise capability of industry

Enterprise SG will launch a pilot Executive in Residence programme
- Fund more than 10 TACs of all sectors
- Provide expert advice
Heartland Enterprise Upgrading Programme to support heartland enterprises

Research Innovation and Enterprise 2020 Plan

AI, industrial robotics, urban solutions and sustainability, health and biomedical sciences
Enhance solutions and sustainability
Number of biomedical startups doubled from 2014: More than 300 startups now

Enhancing digital connectivity

Singapore customs connecting with the global trade network platform
Last month concluded the first digital economy agreement with Chile and NZ
Enable more trade

Set of measures to drive transformation

The government will allot $8.3b over the next three years to enable transformation and growth

SINGAPORE'S FOUR AREAS OF GROWTH

1) Grow our economy, Transform enterprises, Create opportunities

To account for half of global GDP by 2040
Productivity rose by 2.6% per year; an improvement over the 2.2% growth in the preceding 3-year period
2016-2019: real median income grew by 3.7% per year, up from 3.2% per from the preceding 3 years

2) Care for Singaporeans in every stage of their lives, creating inclusive society

3) Build a liveable and sustainable SG in the face of climate change, ensure fiscal sustainability

4) Mobilise Singaporeans to work together for this goal

GST HIKE MOVED

Won’t take effect in 2022 but will "not put off increase indefinitely"
Provide assurance package when GST rate is raised
- $6b package for Singaporeans to cushion the increase
Majority of Singaporean households to receive offset to cover at least 5 years' worth of additional GST expenses incurred
Lower income households will receive much more
- 1-3 room HDB flats: Equivalent to 10 years' worth of additional GST expenses incurred
- Every adult Singaporean: Cash payout of $700-$1,600 over five years
- 4-room HDB flat: Will receive about $7,000 in offset over five years in total, cash about $4,000
Fully offset the GST for the lower half of retiree households
Significantly offset the upper half of retiree households
Budget will set aside $6b for the assurance package in the GSTV Fund in this year’s package

COVID-19 MEASURES

The government will set aside $800m to help soften the impact of COVID-19, in which a bulk will go to the Ministry of Health
To reduce pressure on corporations, the government will provide $4b of stabilisation and support packages
To help SG households and families, the government will provide $1.6b of care and support packages
Extend reskilling drom 3 months to 6 months
Job support scheme: Retain and train 330,000 local workers
Tourism
- Tourism: Tax rebate of 30% for 2020 for conventions, exhibition venues, etc.
- Ferry terminal: 15% property tax rebate
- Integrated resorts: 10% property tax rebate
Aviation
- Rebates of aircraft lending
- Assistance to ground agents
- Assistance to shops
- 15% property tax rebate for Changi Airport
Food Services and Retail
- Full-month rental waiver to any stallholders in NEA hawkers and markets
- HDB provide half month rental waiver to its commercial tenants
- Grant 15% property tax rebate for qualifying commercial properties
- Encourage reduce rents
Ministry of Transport's point-to-point support package
- Taxi and car operators have come out strongly support by matching government contribution

Enhance the enterprise financing schemes

Raised from $300,000 to 600,000
Government's risk-share on the loans raised to 80% from 50-70%

WAGE CREDIT SCHEME

Raised to $5,000 ceiling from $4,000 for qualifying wage increases given in 2019-2020
Government co-funding levels for 2019 and 2020 raised by 5 percentage points to 20% and 15%
$1.1b to go to about 90,000 enterprises to benefit more than 700,000 Singaporean employees
Stabilisation and support package to provide economy-wide support to help enterprises with cashflow
Income tax rebate at 25% of tax payable capped at $15,000 per company (costs about $400m)

Two stabilisation and support packages for workers worth $5.6b