The two Budgets recently unveiled by Singapore and Hong Kong have at their core expansionary fiscal stimulus designed to stimulate the economy to combat the adverse impacts from the COVID-19 outbreak which originated in China.
Basics of Budgets
The Singapore Budget 2020 was announced on Tuesday (18 Feb) by the country’s Finance Minister, Heng Swee Keat with a budget stimulus package amounting to S$6.4 billion. Out of this total, S$800 million is to be allocated to the frontline agencies handling the virus outbreak with most of the funds funneled into the Ministry of Health (MOH). The remaining S$5.6 billion will form the Stabilisation and Support Package to assist workers and firms (S$4 billion) and the Care and Support Package (S$1.6 billion) to support households “during this period of uncertainty”.
The Hong Kong Budget 2020 was announced on Wednesday (26 February) by the Financial Secretary, the Honourable Paul MP Chan who delivered his fourth budget whose aim is to support livelihoods and enterprises while also boosting the economy and protecting jobs. The value of the stimulus package in the budget is HK$120 billion (S$21.5 billion). To assist smaller companies, the Hong Kong government will also offer guarantee of over HK$20 billion (S$3.58 billion) under concessionary low-interest loans.
According to Mr Heng, the goods and services tax (GST) will need to be increased to 9 per cent from 7 per cent which is due for implementation by 2025. Also, the tax increase will not be carried out in 2021, he confirmed. The time when the GST is increased is when the S$6 billion stimulus package is planned to be implemented so that the effect of higher tax can be cushioned. This will grant offsets to most Singaporeans allowing them to offset about five years’ worth of GST expenses incurred when the hike occurs.
Taxes: Hong Kong
As for Hong Kong, the government will lower profits tax for the assessment year of 2019/2020 but with a limit of HK$20,000 (S$3583.50). With lower profit tax, this will benefit 141,000 taxpayers although government revenue will be slashed by HK$2 billion (S$0.36 billion). In addition to this, many waivers will be also be introduced. For example, the rates for non-domestic properties for all four quarters of 2020-21 will be waivered. Not only that, business registration fees for the same period will also be waived and this will benefit 1.5 million business operators. The registration fees for all annual returns for two years will also be waived which will benefit 1.4 million businesses. For 200,000 eligible low-income households under the anti-epidemic fund, they will be offered a one-off special allowance.
In Singapore, support in the form of defraying wage costs will be provided to companies. The two new schemes introduced are the Wage Credit Scheme and the new Jobs Support Scheme will be enhanced so that worker can stay employed and businesses can be supported as part of the main S$4 billion Stabilisation and Support Package. The Wage Credit Scheme will be improved where by businesses undergoing transformation efforts are supported and they are encouraged to share productivity improvements with their employees through co-funding wage increases. On the other hand, the Job Support Scheme will support give support to all active businesses, excluding government organisations, in retaining local workers. Wages will be offset for three months at the limit S$3,600 per worker for up to 8 per cent of permanent residents and Singaporeans. Added to this, the SkillsFuture Enterprise Credit will be added to the already successful SkilsFuture programme, whereby companies are encouraged to better their business operation and workforce simultaneously. This Credit will benefit over 35,000 enterprises, particularly SMEs, by defraying 90 per cent of their own expenses in skills training, job redesign and business transformation.
Workers: Hong Kong
As for Hong Kong, salaries tax will be removed with the limit of HK$20,000 (S$3583.50) under personal assessment for the year of assessment 2019-2020. As many as 1.95 million taxpayers will benefit although government revenue will decline by HK$18.8 billion (S$3.37 billion). Residential properties will also see the rates waived for four quarters cash payout alongside the disbursement of HK$10,000 (S$1791.75) to permanent residents in Hong Kong aged 18 or above so that burden can be lightened and consumption can be boosted. This measure will benefit 7 million people at the cost in expenses of HK$71 billion (S$ 12.72 billion).
Singapore’s budget will allocate S$800 million to help mitigate the adverse impact of COVID-19 virus, with most of the fund channeled to MOH. The government will also provide S$1.6 billion of care and support packages to assist families and households.
Healthcare: Hong Kong
As for Hong Kong, the Hospital Authority and the Department of Health will be provided with sufficient financial support to battle the outbreak. The Hospital Authority will be provided recurrent funding of HK$75 billion (S$13.44 billion), which is an amount 35 per cent greater than the provision of HK$55.6 billion (S$9.96 billion) in 2017-18.
Support for Industries: Singapore
In Singapore, under the Adapt and Grow Initiative, the five hardest-hit sectors which are tourism, aviation, retail, F&B, and point-to-point transportation services sectors will be given support for retaining and reskilling 330,000 workers as well as managing cash flow and operating costs. The current three months support duration will be extended to six months.
The tourism sector will see property tax rebates of 30 per cent for exhibition venues, conventions and other places, 15 per cent for ferry terminal as well as 10 per cent for integrated resorts. The aviation sector will get property tax rebates for Changi Airport, rebates of aircraft landing as well as assistance to shops and ground agents. As for the food services and retail sector, Housing Development Board will offer half month rental waiver to commercial tenants and sellers in NEA markets and hawkers will get full month rental waiver.
Also, rents will be encouraged to be reduced and qualifying commercial properties will get 15 per cent property tax rebate. Furthermore, under the Singapore Ministry of Transport’s point-to-point support package will provide support to car and taxi operators alongside government contribution. The Stabilisation and Support Package will benefit businesses by having the corporate income tax rebate at the rate of 25 percent of tax payable limited at S$15,000 per company for the 2020 tax year assessment. Totalling around S$400 million, the rebate will be to the benefit of all tax-paying firms.
Support for Industries: Hong Kong
In Hong Kong, stamp duty is proposed to be waived on stock transfers paid by Exchange Traded Fund (ETF) market makers during the creation and redemption of ETF units listed in Hong Kong. With this, the transaction cost of ETFs listed will be lower and the development of the ETF market in Hong Kong can be fostered. In addition to this, a total of HK$66 billion (S$11.81 billion) worth of green bonds are planned for issuance in the next five years to develop Hong Kong as a green hub. Silver bonds worth not less than HK$13 billion (S$2.33 billion) will be issued for Hong Kong residents aged 65 or above, alongside inflation-linked retail bonds.
In addition to this, eligible insurance businesses including marine insurance can get their profits tax halved whereas the government will attract more global shipping companies to set up in Hong Kong by exploring other tax measures. Similar to Singapore, the tourism sector will also benefit from the extra HK$700 million (S$125.30 million) allocated for the Hong Kong Tourism Board. Also, to bolster community understanding of the concept of the rule of law, HK$450 million (S$80.55 million) has been allocated for the Department of Justice. In the housing sector, the estimated public housing production in Hong Kong for the next 5 years is 100,400 units, with 74,400 units being public rental housing. In the same time period, 19,600 residential units will be completed, marking a 25 per cent increase from the last 5 years. The 15 residential sites developed under the 2020-21 Land Sale Programme is able to house 7,500 residential units. Alongside other redevelopment projects, the land supply for 2020 can provide 15,700 units.