How Budget 2022 can help the tourism and entertainment sectors

[SINGAPORE] As we enter Year 3 of the Covid-19 pandemic, the tourism and entertainment sectors in Singapore are still struggling and the light at the end of the tunnel remains elusive.

Towards the end of last year, the high vaccination rate and the opening of more Vaccinated Travel Lanes (VTLs) led to hope of a step forward; however, an initial surge in cases, followed by the international spread of the Omicron variant, tempered that optimism.

Even with the opening of the VTLs, the primary users were those visiting family and friends or travelling on business - the various requirements for travel and ongoing caution mean that there has been but a trickle of tourists.

Staycations remain the only relief for most hotels, while restaurants at least have the "rule of five" to sustain them. However, it is clear that the limited capacity due to safe-distancing measures, and the fact that many people continue to work from home and are not venturing outside during the week, are still creating challenges.

In the last two years of "Covid-19 Budgets" (including four tranches in 2020), the Singapore government has provided significant support to the sectors hardest hit by the pandemic - aviation, tourism, land transportation, restaurants and the arts are high on the list. The 2021 Budget extended several existing schemes to subsidise wages and provide finance and relief to businesses, but the Job Support Scheme (JSS) for retail, food and beverage and tourism ended last Dec 19. Industry players will thus be watching closely to see whether these schemes are renewed, extended or pared back as Singapore recalibrates through the "stabilisation phase" towards a "new normal".

Overall, our expectation is that this year's Budget announcement will focus less on big tranches of sector relief as purse strings tighten; instead, it will unveil more targeted actions to focus on issues that will arise as the economy recovers in the coming year.

However, industry players have called for an extension of the JSS for another three to six months or until the economy fully reopens - perhaps set at 25 per cent of wages or, at the very least, at 10 per cent of wages - and an extension of the Rental Support Scheme.

Other schemes that could be extended include the Temporary Bridging Loan scheme, which provides working capital, and the Job Growth Incentive that encourages new hires to be taken onboard.

Overall, perhaps we can expect to see more attention placed on incentive levers through the enhancement and extension of the Productivity Solutions Grant, Enterprise Development Grant, Scale-up SG and the Enterprise Financing Scheme Project Loan. All of these focus on capacity building, innovation and internationalisation to encourage companies to invest to grow.

Tax credits on training expenditure could also be provided for qualifying training costs of businesses that have made use of the downtime during the pandemic to reskill workers, and to encourage businesses to continue to invest in workforce training to improve adaptability to the structural changes that will define the new normal.

However, for all these schemes and incentives, the upturn for the tourism and entertainment sectors, at the end of the day, will be dependent on the return of paying customers.

While the government could potentially support this through financial support schemes for individuals and another distribution of SingapoRediscovers vouchers to get people through the doors of businesses, other factors will come into play.

In particular, the Goods and Services Tax (GST) will be a hot topic. The government previously announced an increase in the standard rate from 7 per cent to 9 per cent before 2025. Since then, every year has become a watching brief for this moment. The tourism sector, in particular, will again hope that this is not the year, as an increase in GST on top of current inflationary pressures would not help their economic recovery.

The reality, though, is that the biggest wish for most tourism and entertainment businesses in 2022 is for Singapore to continue to open up - that VTLs continue to expand to bring in tourists, that rules on dining-in continue to be relaxed, that mass events return and that the economy picks up with it.

For this wish to come true, the manpower crunch in the tourism and entertainment sectors due to the pandemic would need to be addressed to handle the upsurge in tourists and visitors, both foreign and domestic. Perhaps a list of jobs for which there are insufficient Singapore resident workers could be published. For these jobs, the resident labour market test could be waived, thereby simplifying the administrative requirements and costs.

Ultimately, the rebound of the tourism and entertainment sectors goes beyond assistance from the Budget, and perhaps beyond Omicron - and if the last two years have shown us anything, it is that there is a lot of track still to run to reach the light at the end of the tunnel.

James Walton and Ong Siok Peng are leader and tax leader respectively for Deloitte Singapore's Travel, Hospitality and Services Sector services. These are their personal views and may not represent the views of the firm.