After grappling with a shortfall in tax revenues, Indonesia is now exploring the possibilities of setting up tax havens with hopes of bringing funds back into the country.
On Sunday, Coordinating Maritime Minister Luhut Panjaitan revealed that Indonesia is in its ‘early stage’ of developing plans to set up tax havens in order to attract more money to fund infrastructure projects.
The islands of Bintan and Rempang are reportedly considered to be tax haven areas where both local and foreign businesses are welcome to build shell companies under lower tax rates in order to retain their offshore investment.
Further, the government wishes to bring back billions of dollars through an amnesty programme, which according to the central bank could lure approximately Rp.560 trillion cached overseas. The amnesty programme was planned by President Joko Widodo to stimulate economic growth by allowing individuals involved to invest in assets like gold, property and other related infrastructure projects.
“This is actually a good idea for Indonesia, particularly with the tax amnesty programme already underway,” Minister Panjaitan said as reported by The Jakarta Globe.
Regardless, Panjaitan admits that the government still needs to consider the technical aspect of this plan.
It is possible that the country would have to face even more pressure on rupiah, domestic asset demand and prices, according to Singapore-based senior economist Edward Teather.