Jakarta. The government has earmarked two Indonesian islands near Singapore as its own tax havens to prevent taxpayers from keeping their assets offshore — in Singapore, for example, Coordinating Maritime Minister Luhut Panjaitan said on Friday (12/08).
Resort islands Bintan and Rempang, both an hour's ferry ride away from Singapore, may soon become low-tax jurisdictions where Indonesian and foreign businesses can set up shell companies to keep their offshore investments.
The government wanted to establish the tax havens since an estimated Rp 1,000 trillion ($76 million) 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.
Businesses often set up shell companies in tax havens like Singapore, Mauritius, the British Virgin Islands and Panama where they can pay lower taxes — and sometimes no tax at all — and get all sorts of facilities to make investment and transactions.
"This is actually a good idea for Indonesia, particularly with the tax amnesty program already underway," Luhut said.
The government has not set a deadline for when the tax havens will be opened. First it will need to revise the existing tax code, prepare the necessary infrastructure and eliminate red tapes to ease business activities in the area.
Neighbor Malaysia has already offered a similar tax haven at nearby Labuan Island, which offers corporate tax rates as low as 3 percent, attracting both foreign and local businessmen to set up shell companies there.