Indonesia has reportedly earmarked two Indonesian islands near Singapore as its own tax havens.

Indonesia is considering options for setting up tax haven jurisdictions as it tries to lure back billions of dollars through its amnesty programme to fund infrastructure projects and finance the widening budget deficit, the co-ordinating maritime minister Luhut Panjaitan said, according to Bloomberg.

Late last week, Indonesia’s Finance Ministry said it would allow repatriated funds to be invested in assets such as gold, property and infrastructure. 

Bank Indonesia has estimated the amnesty will bring back around IDR560 trillion ($43 billion) in assets held offshore.

Under new plans, Indonesian and foreign businesses may be able to set up shell companies in Bintan and Rempang – two islands near Singapore – and enjoy lower tax, the Jakarta Globe reported, citing Panjaitan.

"This is actually a good idea for Indonesia, particularly with the tax amnesty programme already underway," he was quoted as saying.

Malaysia already has a similar tax haven on nearby Labuan Island, which offers corporate tax rates as low as 3 per cent and attracts both foreign and local businessmen to set up shell companies, the newswire said.

Indonesia's tax amnesty, introduced last month, provides a waiver on tax liabilities along with tax administration and criminal sanctions in the area of tax, affecting income tax, value added tax and taxes on luxury items.