Singapore Budget 2021 Commentary

Last year, the Singapore economy contracted by 5.4% in the worst recession on record. In response, the Minister delivered an unprecedented 5 budgets that deployed almost $100B to combat the COVID-19 crisis. This year, the economy is forecast to grow 4% to 6%. However, this recovery is expected to be highly uneven, with some sectors growing well and others remaining under stress.

In Budget 2021, the Minister announced an $11B COVID-19 Resilience Package to support the recovery process. This will primarily go towards safeguarding public health, including the provision of vaccinations as well as continued support for workers and businesses that is skewed towards the hardest hit sectors. As anticipated, this moves away from the broad-based support provided last year to a more targeted support for hard-hit sectors that remain most affected by the economic downturn.

More specifically, the Government continues to provide support to businesses and workers through an extension to the Jobs Support Scheme (JSS), which is targeted towards supporting the hardest hit sectors such as aviation, aerospace, and tourism. The Minister also announced financial support packages for specific sectors, including aviation, land transport, arts & culture, and sports. This is no surprise given the sensitivity of these sectors to global travel and social connectivity.

For families still coping with uncertainties brought on by COVID-19, the Minister announced a $900M Household Support Package, which includes one-off cash payments with lower to middle-income families receiving more. Looking ahead, the Minister also spoke about measures to strengthen social safety nets to support the more vulnerable members of society, including low-wage workers and lower income families.

The Minister confirmed that the proposed GST rate increase from 7% to 9% will take place sometime between 2022 and 2025, and this will be sooner rather than later subject to the economic outlook. The Minister reiterated that the $6B Assurance Package announced last year will help most Singaporean households cushion the impact of the GST increase when it comes.

Singapore will also introduce GST on the import of low-value goods via air or post that are bought online, as well as on Business-to-Consumer imported non-digital services from 1 Jan 2023. This is in line with the trend seen more broadly at the international level and is designed to ensure a level playing field for local businessesas compared with their overseas counterparts.

The Minister also touched on the Singapore Green Plan 2030, which was unveiled earlier this month. This includes a plan to tackle the climate crisis, efforts to increase solar capacity and research into other renewable energy sources, green infrastructure projects, and incentives to encourage wider adoption of low emission vehicles—all intended to build a more sustainable future for generations to come.

Budget 2021 was aptly titled “Emerging Stronger Together”. Last year’s budget was geared towards emergency support measures whereas Budget 2021 provides more targeted support towards the sections of business and society that continueto struggle amid the pandemic. This is coupled with a sharp eye towards the future with regard to business innovation and digital transformation, along with strengthening efforts to tackle the climate crisis and invest in renewable energy sources.

As the Minister aptly summarised his sentiments on the Ministry of Finance’s Facebook page, “To emerge stronger, we must find new ways to work together, innovate, and transform our economy”.

A snapshot of the Budget 2021 and a commentary on the tax changes are provided in the following pages—Happy reading!