Indonesia is considering options for setting up tax-haven jurisdictions as it tries to lure back billions of dollars through its amnesty program to fund infrastructure projects and finance the widening budget deficit, Coordinating Maritime Minister Luhut Panjaitan said on Sunday.
News of the haven plan follows an announcement by the government on Aug. 11 that it would allow repatriated funds to be invested in assets such as gold and property.
The central bank has said the tax amnesty program could attract about 560 trillion rupiah ($43 billion) of funds stashed overseas. More avenues to park the repatriated money may encourage greater participation and help 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 and enjoy lower tax, the Jakarta Globe reported, citing Panjaitan. Both islands are located around 60 kilometers (37 miles) away from Singapore.
The expectation that the amnesty will 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 Aug. 11 announcement.
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 in 2016.