The COVID-19 outbreak has impacted our people and our businesses. Budget 2020 offers measures to help Singapore’s most-affected sectors move forward, while transforming the way we protect and grow our economy.
COVID-19, which broke out in China in December 2019, has since spread to more than 70,000 people in over 20 countries and has overtaken the 2003 Severe Acute Respiratory Syndrome (SARS) epidemic both in terms of confirmed cases and deaths.
To date*, Singapore has 81 confirmed cases of the virus, one of the largest number of infections outside China. In response to new cases without any links to previous cases or travel history to China, the Government raised its disease response level to DORSCON Orange on 7 February 2020.
Given China’s 19.71% share of the global Gross Domestic Product (GDP) and a much more inter-connected global economy than in 2003, the impact on the Singapore economy will be significant, with the FY 2020 GDP forecast already revised downwards to between -0.5% to 1.5%.
The COVID-19 outbreak has also created public anxiety and taken a heavy toll on businesses. Sectors such as aviation, tourism, retail, food and beverage and point-to-point transport have been most severely hit. Many supporting industries are also affected.
* Accurate as of 18 February 2020
To help workers and businesses deal with the immediate economic impact arising from the COVID-19 outbreak, the Government has announced a S$4 billion Stabilization and Support Package, which provides broad-based and targeted measures for the following:
(iii) Specific sectors
Jobs Support Scheme
Employers will receive an 8% cash grant on the gross monthly wages of each local employee (applicable only to Singapore Citizens and Permanent Residents) for the months of October 2019 to December 2019, subject to a monthly wage cap of S$3,600 per employee. Cash grants received by employers would be tax exempt.
Enhancements to Wage Credit Scheme
This scheme, which co-funds wage increases for Singaporean employees, will see an increase in the qualifying gross monthly wage ceiling from S$4,000 to S$5,000. The Government will also increase the level of co-funding by five percentage points to 20% and 15% of the wage increases in 2019 and 2020 respectively.
Enhanced SME Working Capital Loan
The SME Working Capital Loan (which has been subsumed under the Enterprise Financing Scheme), will be enhanced to increase the maximum loan quantum from S$300,000 to S$600,000. The Government's risk share will also be increased from the current 50% to 70%, to 80% for SMEs borrowing from Participating Financial Institutions under the scheme. The above enhancement will be effective from March 2020 and is available for one year till March 2021.
Corporate income tax rebate
Companies will enjoy an enhanced corporate income tax rebate of 25% of tax payable, capped at S$15,000 for YA 2020. This is an increase from the 20% rebate (capped at S$10,000) granted for YA 2019.
Interest-free instalments for Estimated Chargeable Income (ECI) payments
An additional two months of interest-free instalments will be granted to companies paying their corporate income tax by GIRO when they file their ECI within three months from their financial year-end. This automatic extension of instalment plan will apply to companies that file their ECI from 19 February 2020 to 31 December 2020; or companies that file their ECI before 19 February 2020 and have ongoing instalment payments to be made in March 2020.
Enhanced carry-back relief scheme
The carry-back relief scheme will be enhanced to allow all persons carrying on a business, including sole proprietorships as well as partnerships, to carry back qualifying deductions (capped at S$100,000) for YA 2020 for deduction against assessable income up to three immediate preceding YAs (previously only up to the immediate preceding YA), subject to certain conditions.
Options to accelerate capital allowance claims and deductions
a. Taxpayers who incur capital expenditure on plant and machinery in the basis period for YA 2021 will have an option to claim accelerated capital allowance over two years. Taxpayers can claim capital allowances of 75% of the costs in YA 2021 and the remaining 25% in YA 2022. No deferment of claims is allowed under this option.
b. Taxpayers who incur qualifying expenditure on renovation and refurbishment for the basis period of YA 2021 will have the option to claim renovation and refurbishment deductions in one YA (instead of over three YAs). The cap of S$300,000 for every relevant three-year period continues to apply.
Enhancement to the Adapt and Grow initiative
Employees in affected sectors such as tourism, aviation, retail and food services sectors will receive enhanced support through new redeployment programmes. The funding support period for existing redeployment programmes (i.e. Job Redesign Place-and-Train (PnT) Programme for Hotel Industry and Job Redesign PnT Programme for Retail Industry) will be extended from three months to a maximum of six months.
Property tax rebate (PTR) for qualifying commercial properties
a. 30% PTR for accommodation and function room components of licensed hotels and serviced apartments, and Meetings, Incentives, Conventions and Exhibitions spaced components of Suntec Singapore Convention & Exhibition Centre, Singapore EXPO and Changi Exhibition Centre
b. 15% PTR for other qualifying commercial properties such as the premises of international airport and tourist attractions, shops within hotels, etc
c. 10% PTR for Marina Bay Sands and Resorts World Sentosa
One-year temporary bridging loan programme for tourism sector enterprises
Eligible enterprises will be able to borrow up to S$1 million, with the interest rate capped at 5% p.a. The Government will co-share up to 80% of the borrowing risk.
S$112 million aviation sector assistance package (co-funded by the Government)
a. Rebates on landing, parking and regulatory fees, etc. for airlines, freighter airlines and cargo agents
b. Assistance to ground handling agents
c. Rental rebates for shops and cargo agents at Changi Airport
Port dues concession
Cruise ships and regional ferries with a port stay of not more than five days and passenger-carrying harbor craft will be given a 50% port dues concession from 1 March 2020 to 31 August 2020.
Hawkers managed by the National Environment Agency will be provided with one month's worth of rental waiver while qualifying commercial tenants managed or owned by other government bodies will be provided half a month's rental waiver.
The Stabilization and Support Package offers both broad-based measures as well as targeted measures to sectors most affected by the COVID-19 outbreak – namely, tourism, aviation, retail, food and beverage, and point-to-point transport.
The introduction of the relief package is necessary, timely and welcomed to weather the immediate economic impact. Measures such as PTRs of up to 30% for the tourism sector, bridging loans and rental waivers for targeted sectors provide a much-needed reprieve from the sudden impact of the crisis.
Beyond the short-term support package, businesses should set their sights on the medium- and long-term measures in the transformation and growth of their enterprises to scale up, innovate and internationalize to enter new markets and reach new customers. This can be done through the Adapt and Grow initiative to train, upskill and reskill local workers, so as to prepare themselves to ride on the economic upturn.
While it is still too early to tell if the Stabilization and Support Package can sufficiently offset the impact on local businesses, it would certainly go a long way towards helping local businesses tide over the difficult period and retain jobs, where possible. Compared to the S$230 million SARS relief package provided in 2003, the S$4 billion budget allocated to the Stabilization and Support Package is far more generous and significant.
This demonstrates the Government's appreciation of the impact of the outbreak on Singapore's economy and workforce, and its commitment to helping affected stakeholders, including workers, businesses and specific sectors.
We are seeing the integration of health and economy now more than ever. KPMG has long been an advocate that investment in health is investment in wealth, with every year of life expectancy gained by a country equating to a 4% contribution to GDP. But as the current situation shows, investments in healthcare cannot be taken for granted. We applaud the Government for its commitment to a resilient healthcare ecosystem, as Singapore has achieved the "gold standard" for COVID-19 control at the global level. We look forward to exploring new sustainable healthcare financing programmes.