Indonesia is considering options for setting up tax-haven jurisdictions as it tries to lure back billions of US dollars through its amnesty program to fund infrastructure projects and finance the widening budget deficit, Indonesia Coordinating Minister for Maritime Affairs Luhut Panjaitan said yesterday.
News of the haven plan follows an announcement by the government on Thursday that it would allow repatriated funds to be invested in assets such as gold and property.
AMNESTY
The central bank has said the tax amnesty program could attract about 560 trillion rupiah (US$43 billion) of funds stashed overseas.
More avenues to park the repatriated money might encourage greater participation, and help Indonesian President Joko Widodo partly plug a shortfall in tax revenue, as the nation grapples with a slowdown in China and low commodity prices.
“It is still in early stage,” Panjaitan wrote in a mobile-phone text message. “The government still needs to discuss the technical aspect of it.”
Indonesian and foreign businesses would be able to set up shell companies in Bintan and Rempang, Indonesia, and enjoy lower tax, the Jakarta Globe reported, citing Panjaitan.
Both islands are located about 60km from Singapore.
The expectation that the amnesty would draw funds into the country appears to be putting upward pressure on the rupiah, domestic asset prices and demand, Edward Teather, a Singapore-based senior economist at UBS Group AG, wrote in a note sent by e-mail before the announcement on Thursday.
The rupiah has strengthened 5.1 percent this year. The Jakarta Composite Index has rallied 17 percent, making it the third-best performer in Asia so far this year.
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