Jakarta. Chief Investment Minister Luhut Binsar Pandjaitan has called for the suspension of the controversial tax hike on nightclubs, karaoke houses, and bars due to mounting protests from industry stakeholders.

The government has imposed taxes ranging from 40 percent to 75 percent on those leisure service providers -- up significantly from 15 percent -- since January 5.

The decision triggered a wave of condemnations from industry associations and prominent individuals and even a legal motion to the Constitutional Court.

“In my opinion, we need to postpone the implementation [of the tax hike] to allow us time to evaluate its impacts on the people and especially small-scale businesses,” Luhut wrote in an Instagram post on Wednesday. 

“There are many workers whose income depends on small- and medium-scale leisure service providers. For this reason, I think there is no urgency to impose the tax hike,” he added.

The Instagram post carries a video in which Luhut said the tax hike was initiated by a House of Representatives commission. 

Luhut also said he recently visited Bali to discuss the issue with the governor and tourism industry players and learned that small traders on the resort island could fall victim to the tax hike.

His statement came a day after a Finance Ministry official defended the decision to implement the tax hike.

Lydia Kurniawati, the ministry’s director of regional taxes, justified the move by arguing that these leisure service providers cater to a certain business category, implying that the policy would not significantly impact low-income families.

Taxes on other entertainment businesses were capped at 10 percent. This includes cinemas, beauty contests, art exhibitions, motor racing competitions, horse races, circuses, sports games, zoos, and massage parlors.

Hariyadi Sukamdani, chairman of the Indonesian Tourism Industry Association (GIPI), equated the new tax to a covert attempt to "kill the industry."

“These taxes are unreasonably high. Does the state intend to dismantle the industry?” Hariyadi questioned during a recent press conference.

“The industry generates a substantial number of jobs that don’t require high education, playing a crucial role in supporting the people’s economy,” he added.

He alleged the absence of a scientific study on the contribution of the affected entertainment businesses to the national economy before the tax hike was imposed.

The Indonesian Spa & Wellness Association had previously filed a motion to the Constitutional Court challenging the tax policy.

Former singer Inul Darastita, who owns karaoke houses, took to social media to express discontent with the tax increase from previously 15 percent.

“How was the new tax range of 40-75 percent calculated? Should we share the burden with our customers?” she questioned on X, mentioning Tourism Minister Sandiaga Uno.

Inul claimed that the number of her employees had dropped from around 9,000 to 5,000 since the Covid-19 pandemic, stating that her business wouldn’t survive under the new tax regime.

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