Indonesia Mulls Plan to Create Its Own Tax Haven
Jakarta. With deliberations over the controversial tax amnesty bill nearing its end, the government has devised a new plan to create a tax haven within the country to encourage those repatriating funds to leave it in the country for good.
Finance Minister Bambang Brodjonegoro on Wednesday (22/06) said the government would like to set up an offshore financial center (OFC) — a low-tax jurisdiction within a small area — that allow residents and non-residents alike to set up shell companies for their offshore investments.
"We want Indonesian companies seeking offshore business no longer be based in [other] tax havens, but in Indonesian territory," Bambang told reporters.
The tax office has long said that obscurity surrounding other sovereign offshore financial centers, like Singapore, Mauritius, British Virgin Island and Panama, have made it harder for it to reign in tax evasion among local companies.
There is no law restricting companies doing business in those tax havens and companies often prefer setting up shell companies in those countries due to its low tax and convenience for facilitating investment or transactions abroad.
Bambang said the government is yet to designate an area nor a time frame for the OFC establishment.
"We can't allow an underdeveloped area [to become an offshore financial center], but we need areas in which the infrastructure is sufficient ... the most important thing is that international banking institution available in the area," he said.
Bambang said this plan has gotten attention from "high-level" people within the government, but OFC establishment hinges upon the tax amnesty program, which aims to repatriate Rp 1,000 trillion ($75 billion) of funds owned by Indonesians in offshore tax havens.
"The point is, the offshore financial center will wait for the tax amnesty initiative to run first," Bambang said.
The minister said tax amnesty bill discussions with the House of Representatives is on course to be completed around June 27 or 28 next week, right before the House passes the 2016 revised state budget.
Tags: Keywords: