Council scraps planned tax on ‘wartegs’ — for now

Bowing to pressure from small business owners, the City Council has scrapped its plan to tax warung Tegal, better known as warteg food stalls.

Council Regional Legislation Board chairman Triwisaksana said on Friday that councilors unanimously decided that the tax would be scrapped, at least for 2011.

“We have discussed several options as to what to do about the planned tax. The Council has decided that it is not urgent for it to be implemented,” Triwisaksana said.

He said that the City Council would further discuss the proposed tax and evaluate comments from the business community.

After public outcry and demands from politicians, Governor Fauzi Bowo decided in December to delay implementation of the tax, which would have imposed a 10 percent tax on wartegs reporting an annual income greater than Rp 60 million (US$6,600).

Wartegs are restaurants — sometimes free-standing, sometimes roadside stalls — that offer inexpensive food (and sociability) to a predominantly blue-collar clientele in a manner evoking an American diner.

The plan to tax the venerable institution was met with a chorus of rejection. Business lobbyists criticized the plan, saying it would be injustice perpetrated against the city’s low-income people and small businesses.

The City Tax Agency was previously scheduled to start collecting the tax on Jan. 1.

Following the brouhaha, the council started a round of discussions on alternatives to the tax policy, including scrapping the policy altogether, postponing its implementation, raising the Rp 60 million benchmark or lowering the tax percentage.

The 2009 Local Tax Law allows local governments to levy up to a 10 percent tax on food businesses, stipulating different figures for upmarket food establishments.

The type of food establishments that would have been affected by the new tax were wartegs and the equally ubiquitous (and popular) Padang restaurants.

The bill was submitted to the City Council in April last year and swiftly approved.

Fauzi declined to implement the bill in December and returned it to the council for further deliberation.

Warung Tegal Owners Association chairman Aji S. Sastoro said he applauded the council’s decision.

“[Fauzi and City Council] have done the right thing by listening to us. We are happy with the decision,” he told The Jakarta Post on Sunday.

There were almost 27,000 wartegs in the Greater Jakarta area, according to reports.

Aji said that it would be a good idea if the city administration dropped its plan entirely.

He said that since that implementation of the plan was only delayed for 2011, there was possibility that it might still be enacted sometime in the future.

“We hope the new tax initiative will never be implemented. It will be harder for us warung Tegal owners if more taxes are imposed on us,” Aji said.

Those who would bear the brunt of the new policies would be the thousands of people who relied on wartegs for their livelihoods, he said.

“Warungs Tegal are simple business, mostly run by small families. We have no proper bookkeeping. Calculating the tax would just be too complicated for us,” Aji said.