Question:
Is the Indonesian government planning to increase the entertainment tax?
Answer:
The government plans to increase taxes by 40% for the entertainment industry. The proposed tax rates are set to take effect in 2024, targeting various businesses in the entertainment sector, such as nightclubs, karaoke bars, regular bars, and spas.
However, this policy has faced opposition from industry players. Perry Markus, the Secretary of the Indonesian Hotel and Restaurant Association (PHRI) in Bali, mentioned that spa entrepreneurs in Bali have submitted a constitutional review request to the Constitutional Court, which has been accepted by the court.
He explained that the matter under review pertains to Article 55 and Article 58 of Law Number 1 of 2022 regarding Financial Relations between the Central Government and Regional Governments. Spa entrepreneurs aim to reconsider the status of the spa industry, asserting that it falls under fitness or health services (wellness) rather than entertainment.
On the contrary, Article 55 of the law categorizes steam baths/spas as part of the artistic and entertainment services. Furthermore, Article 58, paragraph 2, specifically states that the tax rates for Specific Goods and Services Tax (PBJT) on entertainment services at nightclubs, karaoke bars, nightclubs, regular bars, and steam baths/spas are set at a minimum of 40% and a maximum of 75%.
Increasing the tax rate for the entertainment industry by 40% could have both positive and negative implications. On the positive side, it may contribute additional revenue to the government, which can be used for public services and infrastructure. However, on the negative side, it might pose challenges for businesses in the entertainment sector, potentially leading to increased costs for both business owners and consumers.