Since 2015, the Indonesian Government has been proposing a Tax Amnesty Bill. Now a radical idea that could dilute other Asian financial centres, is getting attention from «high-level» people within the government.

A report in the publication Jakarta Globe, quotes the Indonesian Finance Minister Bambang Brodjonegoro as saying that the government would like to set up an offshore financial center (OFC) a low-tax jurisdiction within a small area that would allow residents and non-residents alike to set up shell companies for their offshore investments.

With deliberations over the controversial tax amnesty bill nearing its end, the Indonesian 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.

Threat to Singapore

«We want Indonesian companies seeking offshore business to no longer be based in tax havens, but in Indonesian territory,» the minister told reporters.

It is estimated that in the region of $200 billion in Indonesian money is held offshore in Singapore, and other regional wealth centres. Lawyers, private banks,wealth managers and tax and trust advisers are anxiously monitoring Indonesia's amnesty bill fearing it could lead to an outflow of assets.

Tax Evasion Problem

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.

The Finance Minister said the government is yet to designate an area nor a time frame for the establishment of the OFC.