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An extraordinary Resilience Budget for an unprecedented crisis

When Singapore’s budget for the year 2020 was unveiled in mid-February, there was a glimmer of hope that the Covid-19 outbreak could be a passing storm. After all, the economic growth forecast for the year, whilst gloomy, was still positive.

The Covid-19 pandemic will be a deeply unsettling time for many Singaporeans, write the authors, as jobs and lives may be lost and freedom curtailed during this period.

The Covid-19 pandemic will be a deeply unsettling time for many Singaporeans, write the authors, as jobs and lives may be lost and freedom curtailed during this period.

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When Singapore’s budget for the year 2020 was unveiled in mid-February, there was a glimmer of hope that the Covid-19 outbreak could be a passing storm. After all, the economic growth forecast for the year, whilst gloomy, was still positive.

How things have changed within a matter of weeks.

On March 26, the Government lowered the 2020 growth forecast to a range of -4 to -1 per cent. Just as China begins to see a turnaround in Covid-19 infections, the United States now has the world’s highest number of confirmed cases.

When the last remaining superpower sneezes, no amount of physical distancing will prevent Singapore from falling ill.

In response to an unprecedented and deepening crisis, Deputy Prime Minister Heng Swee Keat announced a supplementary budget, termed the Resilience Budget, on March 26.

It is by all accounts a superlative budget in terms of the breadth and depth of support on offer. When aggregated with funds set aside during the February budget, close to S$55 billion has been earmarked to protect livelihoods and help businesses overcome near-term challenges.

Here, we would like to highlight and discuss some of the more significant measures.

LOAN CAPITAL

Let’s start with the largest piece in the Resilience Budget: S$20 billion has been set aside as loan capital to support the cash flow of good companies with strong capabilities.

Cash has been described as the life-blood of any business, and if the February budget represents a shot in the arm for those affected by the pandemic, the Resilience budget will be a blood transfusion.

What was left unsaid is that enterprises with weak fundamentals will fail as help will be triaged for those whose credit needs are more acute and have the best chance of surviving post-pandemic.

This is understandable, but since there is an element of picking winners, hopefully more information will be made available in the coming weeks on eligibility criteria for funding.

WAGE OFFSETS

S$15.1 billion, or close to 30 per cent of the total S$55 billion package, is earmarked to defray employers’ salary costs of employing Singaporeans and permanent residents.

The base level of support is currently set at 25 per cent on the first S$4,600 of a local employee’s gross monthly wages.

Businesses in the food services sector will receive higher support at 50 per cent of wages, whilst businesses in the aviation and tourism sectors, which are the most adversely affected sectors, will be supported at 75 per cent of wages.

Employers have been urged to hold on to their local employees, but if the situation persist or worsens leading to loss of jobs, we are confident that the Government will be nimble and channel the earmarked funds to tide over those who have been made redundant.

HELPING THE SELF-EMPLOYED AND FREELANCERS

Self-employed persons are not forgotten. The Resilience Budget sets aside S$1.2 billion for this group. Some 88,000 eligible persons will receive quarterly cash payouts of S$3,000 each in May, July and October 2020.

The Ministry of Manpower has published the eligibility criteria on its website. Among the various conditions, it is noteworthy that the net trade income ceiling to qualify for the cash payout has been set at S$100,000 per annum.

This criterion appears generous as the median wage in Singapore is S$4,600 per month or S$55,200 per annum.

On the other hand, SEPs who derive any income from employment do not qualify for the cash pay-outs.

However, it is heartening to know that some flexibility may be accorded to this group, as there would be some who struggle to make ends meet notwithstanding having a part-time employment in addition to being self-employed.

Separately, the authorities may wish to clarify the tax treatment in relation to the cash pay-out received under this scheme.

PROPERTY TAX REBATES

To reduce business costs, approximately S$1.8 billion is designated for property tax rebates on non-residential properties. The Government has strongly urged landlords to fully pass on the rebate to tenants by reducing rentals.

Owners of non-residential properties will enjoy a property tax rebate of at least 30 per cent for the year 2020, with Marina Bay Sands and Resorts World Sentosa qualifying for a 60 per cent rebate.

Qualifying commercial properties that have been more adversely affected by the Covid-19 outbreak, including hotels, service apartments, tourist attractions, shops, and restaurants, will pay no property tax for 2020.

The proposed move by the Government to impose obligations on landlords to pass the property tax rebates to tenants may be seen as drastic, but a necessary move to achieve the policy intention.

Such a move, if implemented quickly, could also help reduce one of the many concerns that tenants are facing during this period of time.

SUPPORT FOR HOUSEHOLDS

An additional S$3 billion will go towards households in enhancing the Care and Support Package, on top of the S$1.6 billion first announced in the February Budget.

Following enhancements in the Resilience Budget, all Singaporeans aged 21 years and above will receive a one-off cash payout of between S$300 and S$900, depending on their level of income and assets (the latter measured in terms of number of owned properties).

Each eligible Singaporean parent with at least one Singaporean child aged 20 and below in 2020 will receive an additional S$300 (instead of S$100).

The increase in monetary assistance will help put cash in the hands of those who may have an immediate need for it and may also help boost consumer confidence as households may cut back on their spending to prepare for uncertain times.

LOOKING AHEAD

The Covid-19 pandemic will be a deeply unsettling time for many Singaporeans. Jobs and lives may be lost and freedom curtailed during this period.

However, we can take comfort in the Government’s robust response to the outbreak. We have one eye firmly on the future — which country can still manage to set aside S$5 billion to protect its shorelines against rising sea levels whilst battling a global pandemic?

In other words, keep calm and carry on, for we have far larger challenges to tackle as a nation in the years to come. 

 

ABOUT THE AUTHORS:

Low Hwee Chua and Chua Kong Ping are respectively Deloitte Singapore’s Regional Managing Partner for Tax and Legal and Singapore Tax Director. These are their own views.

Related topics

Resilience Budget Jobs economy Covid-19 coronavirus Budget 2020 salary

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