Jakarta. Indonesia’s tourism industry would lag further behind Thailand if entertainment tax goes up, Shinta Kamdani, the chairwoman of the country’s employers association Apindo, warned on Thursday.

The controversial entertainment tax hikes have been making headlines over the past week. In 2022, President Joko “Jokowi”  Widodo inked a law that set the entertainment tax to range between 40 percent and 75 percent for karaoke houses, nightclubs, bars, and spas. Jokowi gave the subnational governments two years to make adjustments to the tax hikes. Two years have passed, and the new entertainment tax has officially come into effect.

Indonesia today is struggling to catch up to fellow ASEAN member Thailand in terms of attracting foreign tourists. According to Shinta, the tax hikes could make Indonesia a less attractive tourism destination.

“We will not be able to compete [with other countries]. Thailand today attracts much more tourists compared to Indonesia. And now we have these additional tax burdens,” Shinta told reporters in Jakarta.

Thailand recorded over 28 million foreign tourists throughout 2023, according to its Tourism Ministry. These travelers mostly came from Malaysia, reaching about 4.5 million tourists, followed by 3.5 million Chinese travelers. The latest National Statistics Agency (BPS) data showed that Indonesia saw 10.4 million foreign tourist arrivals in January-November 2023. 

Shinta also commented on the two-year gap before the new tax actually entered into force. According to Shinta, the government did not introduce the new taxes well enough, thus businesses felt they came out of the blue.

The Indonesian Hotel and Restaurant Association (PHRI) is mulling filing a judicial review on the entertainment tax rates at the Constitutional Court. Shinta added: “As PHRI files the judicial review, I don’t think the sub-national government should rush into imposing the 40-75 percent tax rates.”