J

akarta Governor Joko “Jokowi” Widodo says that he will delay levying taxes on the city’s popular
warteg sidewalk food stalls.

The governor said that the taxes would burden the city’s small and medium-scale food-and-beverage businesses.

“It would be better if it [the warteg tax] is eventually scrapped. Let the levy be imposed on larger
restaurants only,” Jokowi said.

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

The word warteg is a portmanteau of warung, meaning store or restaurant, and Tegal, the region from Central Java from which most of the owners of warteg come from.

According to the city’s warteg cooperative association, there are around 10,000 warteg in Jakarta.

Based on Bylaw No. 11/2011 on restaurant taxes; restaurants, war-teg, canteens and cafeterias with an annual turnover greater than Rp 200 million (US$20,844), or Rp 550,000 a day, must pay a 10 percent tax.

The tax was mandated by the 2009 Law on regional taxes and levies, which authorized the government to set a maximum tax of 10 percent on food and beverage businesses.

However, the previous Jakarta administration delayed collecting taxes on warteg, canteens and small cafes, following public outcry and comments from critics who said that the taxes would hurt small businesses and burden customers.

Initially, the Jakarta administration planned to tax every establishment with daily sales of at least
Rp 167,000, or Rp 60 million per year.

The administration of Bandung, West Java, imposed a similar tax on restaurants with an annual income exceeding Rp 120 million, while officials in Surabaya, East Java, currently tax restaurants with annual incomes exceeding Rp 180 million.

The food and beverage sector is growing rapidly in the capital and has become one of the promising areas for development in tourism.

The habit of many Indonesians to gather and hang out (nongkrong) while eating and drinking at cafes, restaurants and street-side food vendors has helped boost the city’s tax revenue.

Such a predilection for socialization has also driven the rapid growth of 24-hour convenience stores in the city, such as US-based 7-Eleven and Japan-based Lawson, which provide public-seating areas like restaurants where people can consume food and beverages purchased in the stores.

According to the Jakarta Tourism Agency, there were 3,497 food and beverage businesses in Jakarta in 2011; comprising 2,738 restaurants, 704 bars and 55 food courts. The total was up almost 10 percent from 3,181 such establishments recorded in 2010.

The culinary sector comprised half of the city’s tax revenues from tourism in 2011, totaling Rp 1.01 trillion, up from Rp 835 billion in 2010, according to the Jakarta Tax Office.

However, regional taxes remained the most significant source of income for the city, and totalled Rp 15.22 trillion in 2011, up 9 percent from Rp 13.96 trillion in 2010.

The city recorded collecting more tax that it had predicted for motor vehicles, vehicle fuel, hotels, restaurants, street lighting and duties on acquiring land and building rights.

Vehicle-related taxes, such as vehicle fuel taxes and vehicle-ownership transfer fees, comprise
the largest portion of the city’s income, accounting for 60 percent of the total.

The budget report also said that the city administration had a surplus of Rp 6.9 trillion in 2011, which it attributed to shortcomings in scheduling and program implementation.