Budget 2021: Covid-19 measures meant Govt spent 25% more but raised 13% less revenue in FY2020

• ​Revised 2020 data shows that the Government generated S$64.6 billion in tax revenue
• It spent $94 billion in the first year of the Covid-19 pandemic
• GST revenue fell by 43 per cent and corporate income tax revenue slid 17.8 per cent
• The Ministry of Health spent 45.2 per cent more in 2020 than in 2019, higher than earlier estimations

SINGAPORE — The Government generated around S$64.6 billion in revenue in the 2020 financial year as all sources of revenue apart from personal income tax came in lower than originally estimated. It is a sharp fall of around 13 per cent in revenue compared with the previous year. 

Government spending, on the other hand, shot up by 24.8 per cent from 2019 to reach S$94 billion. 

Revised data released on Tuesday (Feb 16) revealed the size of the dent on the state’s coffers after the first year of Singapore’s pandemic response.

When compared with 2019, one of the largest drops in tax revenue is from the Goods and Services Tax (GST), which fell by 43 per cent due to the Covid-19 impact on tourism and weaker consumer sentiment.

Revenue also took a hit from lower collections from corporate income taxes (down by 17.8 per cent) and assets taxes (down by 35.1 per cent) due to deferments and rebates that were doled out last yearto help businesses tide through the pandemic.

Personal income tax revenue increased slightly last year to S$12.77 billion, compared with S$12.37 billion in 2019. This is because income taxes payable last year were based on people’s incomes in the 2019 calendar year before the pandemic hit.

The biggest surge in ministry expenses last year were related to Covid-19 as well. The Ministry of Health (MOH) spent 45.2 per cent more, or about S$5.2 billion more than it did in 2019. Its 2020 spending was also S$3.3 billion more than earlier estimated.

Other government ministries — Trade and Industry, Manpower, and National Development — spent more than expected as the Government channelled funds to households and businesses during the crisis.

On the other hand, the ministries of Transport, Defence and Education spent less than budgeted last year.

Overall, the Government is set to accumulate a whopping S$64.9 billion budget deficit last year after accounting for special transfers, the top-up of endowment funds and the net investment returns contribution (NIRC).

The NIRC are the returns on investments of Singapore's reserves and the largest contributor to the state’s coffers. For 2020, the NIRC was revised to S$18.1 billion, around 2.6 per cent less than originally anticipated.

This is the largest budget deficit since Singapore’s independence, Deputy Prime Minister and Finance Minister Heng Swee Keat said in his Budget 2021 statement.

“The deficit is driven by lower revenues due to dampened economic activity and the significant expenditures needed to mount a decisive response to Covid-19,” he said on Tuesday.

The budget deficit led to a S$52 billion drawdown on reserves in order to balance the books last year, out of which S$42.7 billion is expected to be used for the 2020 financial year.

For 2021, another S$11 billion draw on past reserves will be needed to fund the measures announced by Mr Heng in the latest Budget.

If the latest Budget is passed, Singapore will have drawn a net S$53.7 billion from the reserves since the coronavirus was first detected here in January last year. 

The Ministry of Transport will see a large 37.8 per cent jump in its 2021 budget compared with 2020, owing to the resumption of construction activities and more aid for the aviation sector.

MOH’s budget will also grow even further by 13.2 per cent from an already expensive 2020, due to the need to fund Covid-19 measures as well as the greater demand for health and aged care services in Singapore.

The defence budget will increase by 12.7 per cent due to the resumption of normal activities such as military training in 2021.

Last November, Prime Minister Lee Hsien Loong told news agency Bloomberg that it may take some time for Singapore to return to prudence and balanced budgets.

On Tuesday, Mr Heng said that the Government has “carefully thought through the different scenarios” of Singapore’s fiscal situation.

“Based on the current outlook, we expect that as the economy recovers, we will be able to balance our budgets and our revenues will be able to support projected expenditure for these measures,” Mr Heng said.

This assumes that the pandemic will come under control around the world by next year, which will allow economic recovery to happen, he added.

The Ministry of Trade and Industry forecast on Monday that Singapore’s economy will grow between 4 and 6 per cent in 2021.

Mr Heng said: “However, if the global public health and economic outlook worsen, we may not be able to do so… There is a wide cone of uncertainty.” 

Even if the economic and fiscal situation turns out to be worse than thought, Mr Heng said that Singapore must still press ahead with investments in new areas “so as to ride on the structural changes, transform and emerge stronger as an economy and as a people”.