Tax amnesty Indonesia said to be considering ‘tax haven areas’

The southeast Asian archipelago nation of Indonesia is reported to be considering options for setting up “tax-haven jurisdictions”, in an effort to retain billions of dollars being brought into potential play by wealthy Indonesians who have been participating in the country’s ongoing tax amnesty scheme.

According to reports carried by such media organisations as Bloomberg, the Straits Times, the Jakarta Globe and an investment organisation known as Indonesia Investments, the plan could involve setting up the new low-tax district on two islands located near Singapore, where, as it happens, many Indonesians are said to keep their money now.

Bintan and Rempang are currently resort islands, located an hour’s ferry ride from Singapore. They are near another Indonesian island, Batam, which is a free trade zone.

In addition to Singapore, Indonesians are said to make use of such offshore financial centres as Mauritius, British Virgin Islands and Panama.

According to the reports, Indonesia’s government believes a low-tax district could keep funds brought in under the amnesty from leaving again as soon as it’s over.

In an article headlined “Indonesia to Open its Own Tax Havens to Rival Singapore”, the Jakarta Globe said the government “wanted to establish the tax havens since an estimated  Rp1,000trn (Indonesian rupiahs, equivalent to around US$76.4m) [expected] to be repatriated under the tax amnesty scheme may leave the country again as soon as the obligatory three years of keeping the funds onshore expire”.

In particular, the government believes a low-tax district could provide a base for assembling financing that could be used “to fund infrastructure projects and finance the widening budget deficit”, the Bloomberg report said, citing as its source Luhut Panjaitan, Indonesia’s co-ordinating maritime minister.

As reported, Indonesia last month became the latest country to launch tax amnesty programme, in an effort boost its tax coffers ahead of the introduction of the OECD’s Common Reporting Standard. The CRS is aimed at introducing a global system of automatic exchange of information over the next two years.

Other countries which have also introduced tax amnesties have included Argentina and, as reported, South Africa.

In July, as reported, Singapore formally refuted claims that it was trying to undermine Indonesia’s then-just-launched tax amnesty scheme.  In a joint statement, the city-state’s Finance Ministry and Monetary Authority of Singapore said Singapore “has not cut tax rates or changed any of our policies in response to Indonesia’s Tax Amnesty Programme”.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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