In the Ministry of Finance (MOF)’s Budget for 2020, a large amount of focus and resources go into helping businesses and industries overcome recent challenges.
Singapore’s economy grew by a modest 0.7% in 2019, its weakest growth since the financial crisis of 2008.
Just as the global economy was beginning to recover, the COVID-19 outbreak hit unexpectedly last month, said Finance Minister Heng Swee Keat, bringing “new uncertainties”.
In response, many of the initiatives announced in this year’s Budget aim to protect the jobs of local workers as a “foremost concern”, followed by helping enterprises with cashflow to tide through the tough season.
The Government has set up a S$4 billion Stabilisation and Support Package that will help implement a wide range of measures.
Here’s what businesses in Singapore can take away.
Defraying Wage Costs For Employers
To help ensure that Singaporeans stay employed, a new Jobs Support Scheme will be introduced to subsidise the wages of local workers.
Employers will receive an 8% cash grant of each employee’s monthly salary, up to a monthly cap of S$3,600, for three months. This applies to employees who are Singaporeans or Permanent Residents (PRs).
This amounts to a S$1.3 billion payout in total, which employers will receive by 31 July 2020.
An existing Wage Credit Scheme will also receive a S$1.1 billion enhancement to support salary increases for local workers.
The scheme will now co-fund 20% of wage increases in 2019, and 15% of wage increases in 2020, for Singaporean employees earning a gross monthly income of up to S$5,000.
Corporate Tax Rebates And Working Capital Loans
All tax-paying companies will be given a 25% corporate income tax rebate for the year of assessment 2020, capped at S$15,000 per company.
Businesses can also expect enhanced tax treatments for one year, including faster write-down of investments in plants and machinery, and renovation and refurbishment incurred for the year of assessment 2021.
To give Singapore businesses easier access to working capital, the Enterprise Financing Scheme’s Working Capital Loan will double its maximum loan quantum to S$600,000.
The Government will take on 80% of the risk of the loan, increased from the current 50% to 70%.
Additionally, tenants and lessees of government-managed properties can request for more flexible rental payments like instalment plans, to be approved on a case-by-case basis.
Additional Support For Sectors Hit Hardest By COVID-19
Budget 2020 identifies tourism, aviation, retail, food services and point-to-point land transport services as sectors most directly affected by the COVID-19 outbreak. These sectors will receive additional help on top of the measures mentioned above.
Businesses under these five sectors will enjoy an extended funding period for re-skilling workers, increased from three months to a maximum of six months.
In tourism, hotels, serviced apartments and event venues can expect property tax rebates of 30% on their accommodations and function rooms for the year 2020.
Rental rebates will also be rolled out for shops at Changi Airport, while the airport itself gets a 15% property tax rebate.
Previously announced, taxi and private-hire drivers will receive a S$77 million support package to tide them through drops in business.
In the retail and food industry, hawker stall owners and commercial tenants in government-managed facilities will get a month’s rental waiver and half a month’s rental waiver respectively.
S$300 million Set Aside For Deep-Tech Startups
According to the Global Startup Ecosystem report, Singapore’s startup ecosystem is ranked in the top 15 worldwide.
There are about 3,800 technology startups in Singapore, and about 150 venture capital funds investing in local and regional startups.
This year, the Government will improve support for deep-tech startups in emerging technology areas such as pharmbio and medtech, advanced manufacturing and agri-food tech.
To catalyse investment into deep-tech start-ups, an additional $300 million will be set aside under the Startup SG Equity.
Mr Heng says the Government expects this to draw in more than $800 million of private funding over the next 10 years.
Helping Enterprises Grow And Transform
Beyond startups, Minister Heng said that many enterprises are seeking to grow.
The Government’s new Enterprise Grow Package will help businesses innovate and adopt digital solutions, and support their ambitions to enter new markets.
Firms can use a new platform, GoBusiness, to access streamlined license applications and transact more easily with the Government.
To help more SMEs build up their digital capabilities, more companies can benefit from step-by-step guides under the SMEs Go Digital Scheme which will be extended to 13 more sectors.
Singapore companies looking to expand can tap on an enhanced Market Readiness Assistance (MRA) grant, increased from S$20,000 to S$100,000 annually per new market per company, between the financial years 2020 and 2022.
A one-off S$500 SkillsFuture top-up will be made available for every Singaporean aged 25 and above, as part of the Government’s efforts to support workers to develop new skills.
The top-up will be available for use from 1 October this year, and will remain valid for five years until 2025.
To support reskilling, each Singapore aged 40 to 60 in 2020 will also receive an additional S$500 SkillsFuture Credit this year. This can be used from 1 October on about 200 career transition programmes by CET centres.
Enterprises will also benefit from the Government’s investment into the “next bound of SkillsFuture”, with a new SkillsFututre Enterprise Credit.
According to Mr Heng, this is meant to encourage employers to embark on the transformation of their workforce and enterprise in tandem.
Each enterprise will receive S$10,000 to “defray 90 per cent of out-of-pocket costs of business transformation, job redesign and skills training,” he added.
Support For Hiring Senior Workers And People With Disabilities
To support workers who intend or need to stay employed longer, employers who hire older workers will receive funding to offset the cost of their wages.
A new Senior Worker Support Package comprises of Senior Employment Credit, which will help employers offset up to 8% of wages, depending on the age of the employee.
This applies to Singaporean workers aged 55 and above, earning up to S$4,000 a month.
Currently, the highest wage offset is allocated to employers of workers aged 67. This will be raised to age 68 on 1 July 2022.
This new scheme will be in effect for two years, from 1 January 2021 until the end of 2022.
Employers will also be given a CPF transition offset to cover half of the increase in their contribution rates for older workers next year, up to the CPF salary ceiling of $6,000.
Additionally, another new Enabling Employment Credit scheme will also offset wages when employers hire persons with disabilities. It will be available for five years from 2021 to 2025.
Foreign Worker Quotas
The Government will be reducing the quota for skilled foreign workers in the construction, marine shipyard and process sectors over the next three years to encourage firms to hire more Singaporean skilled workers and technicians.
According to Mr Heng, the dependency ratio ceiling (DRC) relating specifically to S-Pass holders will be cut from the current 20% to 18% by 1 Jan 2021, and to 15% on 1 Jan 2023 for these three industries.
The overall DRC, which refers to the overall foreign work quota across all classes of work pass, remains the same at 87.5% for the construction and process sectors, and 77.8% for the marine shipyard sector.
This means that companies in these sectors can hire more low-skilled foreign workers, or work permit holders, as only the quota for skilled foreign workers is being cut.
The Government intends to tighten the number of skilled foreign workers in the manufacturing sector, but only “when conditions allow”, said Mr Heng.
As the manufacturing sector has been contracting due to economic uncertainties, he said that the Government has decided not to reduce its foreign worker quota at this point.
The foreign worker levies for all sectors, including tourism, food and beverage and retail sectors, which have been hit hard by the COVID-19 outbreak, will remain unchanged.
GST Increase Deferred
Many Singaporeans have been holding their breath (un-eagerly) to know if the Goods and Services Tax (GST) will be increasing next year.
Minister Heng announced that GST will remain at 7% in 2021, in light of the current economic challenges.
Not being slapped with a GST hike for now probably means consumers could be more willing to spend and support businesses.
However, Minister Heng emphasised that the increase cannot be deferred indefinitely, and will still be necessary by 2025.
The Government will carefully assess the appropriate time for the GST hike, and Singaporeans will be given “sufficient lead time” for the change, he added.
Featured Image Credit: Gov.sg