Jakarta. Tourism Minister Sandiaga Uno recently said on Wednesday that the Constitutional Court would be able to make a fair and win-win decision on the entertainment tax hikes.

The government’s decision to raise the entertainment tax to range between 40 percent and 75 percent for discotheques, karaoke houses, nightclubs, bars, and spas has sparked backlash from businesses. The Indonesian Spa Association (ASPI) took legal action over the substantial tax increases at the Constitutional Court. The Indonesian Tourism Industry Association (GIPI) also filed a judicial review and demanded the tax should remain capped at 10 percent.

According to Sandiaga, the government will respect the legal actions of the industry associations.

“We are hoping that the [court] will make a fair decision,” Sandiaga said at the Investor Daily Roundtable forum in Jakarta.

Sandiaga then recalled a similar case that took place back in 2011. Back then, the Indonesian Golf Course Owners Association (APLGI) challenged the government’s decision to impose an entertainment tax on golfing. The association at the time said golf should not be subject to such tax as it should classify as a type of sport, rather than entertainment. APLGI eventually won the judicial review against the government with golf no longer being subject to the tax. 

“We have seen it happen in a similar case. So I would like to just have a positive outlook on things, and that this current legal process [on the entertainment tax increases] would result in a win-win decision,” Sandiaga said. 

The Home Affairs Ministry recently issued a circular that enables regional heads to launch fiscal incentives in an attempt to calm the backlashes. 

In 2022, President Joko “Jokowi” Widodo signed a law that stipulated tax rate hikes. Regional governments had two years to make adjustments to the entertainment taxes. But businesses claimed they were unaware of the two-year transition period, saying that the tax rate increase really came out of the blue. 

According to Enggartiasto Lukita, the executive chairman of B Universe, it was not without a reason that the Investor Daily Roundtable forum chose to zero in on the higher entertainment taxes.

“We understand that taxes can be an instrument to support the state budget, but increasing them may take a toll on industries. … particularly those who have just recovered from the Covid-19 pandemic. It may lead to layoffs, and the government might earn less income tax,” Enggartiasto told reporters, shortly after the forum. 
 

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