Indonesia's Hospitality Industry Demands Review of Controversial Entertainment Tax Law
Jakarta. The Chairman of the Indonesian Hotel and Restaurant Association (PHRI), Hariyadi Sukamdani, calls for a judicial review of a law imposing substantial increases in entertainment taxes. He said businesses were excluded from the legislative process, expressing concerns that the new law might result in widespread job losses.
"This is an industry that absorbs a significant amount of labor and does not require higher education, making it essential for the general population," he said at a press conference in Jakarta on Thursday.
Under the law governing Financial Relations between the Central Government and Regional Governments (HKPD), the goods and services tax for entertainment venues like nightclubs, karaoke lounges, bars, and spas are now set at a minimum rate of 40 percent, and a maximum of 75 percent. Previously, the law had stipulated an entertainment tax ranging from a minimum of 10 percent to a maximum of 35 percent.
Sukamdani revealed that stakeholders were not consulted before the regulation was issued in 2022 and took effect in December 2023. He urged the government to engage relevant stakeholders, including the Association of Spa & Wellness Indonesia, the spa industry, and the Association of Spa Therapists Indonesia.
Hariyadi warned that the proposed increase in entertainment tax could potentially give rise to illegal businesses. "Looking at the cost structure, it will undoubtedly lead to closure, unless it sparks illegal activities," he said.
Business associations announced their intention to pursue a judicial review of the law at the Constitutional Court (MK).
"We have no other option but to file a lawsuit with the Constitutional Court because our colleagues in Bali are already feeling the impact," Sukamdani said.
The Association of Spa & Wellness Indonesia submitted a judicial review request for the HKPD Law to the MK on Jan. 3, 2023, seeking a comprehensive examination of the law, particularly concerning taxing spas at 40 percent.
"In our application to the MK, we will cover all sectors, not just spas, because we represent the umbrella organization for the entire tourism industry," Sukamdani said.
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