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Entertainment tax hike could spur illegal activity, industry warns
The entertainment industry is up in arms against the increased tax of 40-75 percent for certain services, saying it was out of reach for some businesses that could be forced to shut down, leaving room for illegal businesses to thrive.
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A microphone stands at a karaoke bar in this stock image. (Shutterstock/File)
I
ndustry players are pressing for legal action against a recent hike to the entertainment tax, arguing that it will hinder their businesses and allow illegal activities to thrive.
The Indonesian Tourism Industry Board (GIPI) is planning to petition the Constitutional Court for a judicial review of the tax hike as regards Article 58, Paragraph 2 of Law No. 1/2022, which stipulates a rate of between 40 and 75 percent for specific goods and services tax (PBJT) on entertainment services, starting at the beginning of this year.
GIPI chairman Hariyadi Sukamdani said the tax hike would hamper the business activities of discos, karaoke bars, nightclubs and spas.
“We deem the tax rate for entertainment services problematic and request [its] revocation by the Constitutional Court,” he said, as quoted by Kontan on Sunday.
Hariyadi, who also chairs the Indonesian Hotel and Restaurant Association (PHRI), added that the new tax rate would eventually hinder the businesses’ operations and force them to close, leaving a void for illegal businesses to fill.
"Do we want to shut down the [legitimate] entertainment industry or allow an illegal industry to thrive? If business owners cannot afford to pay the tax, they will eventually look for clandestine options. That’s not right," he said.
Hariyadi added that an entertainment tax rate of around 10 percent would be ideal.
