Karaoke Tax, Spa, And Night Clubs Increase 40-75 Percent, Government Issues Tax Incentive Circular

Coordinating Minister for the Economy Airlangga Hartarto when met at the Presidential Palace in Jakarta, Friday (19/1/2024). ANTARA/Mentari Dwi Gayati

JAKARTA. The government immediately issued a circular containing questions of fiscal incentives including relief in the application of special entertainment tax rates of 40-75 percent.

Coordinating Minister for the Economy Airlangga Hartarto said the amount of special entertainment tax rates previously complained by a number of business actors was discussed in a meeting with President Joko Widodo and ministers of the Advanced Indonesia Cabinet at the State Palace, Jakarta, Friday, January 19.

"The government will issue a circular regarding Article 101. In a circular that will be prepared by the Minister of Finance and the Minister of Home Affairs and then the government will also see that the tourism sector has just recovered," Airlangga said as quoted by ANTARA.

The entertainment tax incentives are regulated in Article 101 of Law Number 1 of 2022 concerning Financial Relations between the Central Government and the Regional Government (UU HKPD).

In the regulation, it is written in supporting investment facilities policies, governors/regents/mayors can provide fiscal incentives to business actors in their regions.

The fiscal incentives are in the form of reductions, relief and exemption or elimination of the tax principal, principal levies and/or sanctions.

Airlangga said President Jokowi ordered other incentives to be prepared, such as providing 10 percent of the agency's income tax incentives (PPh), but technically it is still under discussion.

"The corporate income tax incentives in the tourism sector are more overall, more for all sectors, and what is more considered is the President asking to be reviewed by the Corporate PPH of 10 percent," said Airlangga.

The circular certificate will also be socialized after publication.

The entertainment tax has been regulated in Government Regulation of the Republic of Indonesia Number 12 of 2019 concerning Regional Financial Management and Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments.

In the regulation, it is stated that certain goods and services tax (PBJT) for entertainment services at discotheques, karaoke, nightclubs, bars, and steam/spa baths is set at a minimum of 40 percent and a maximum of 75 percent.

The amount of the tariff considers that this type of entertainment is only enjoyed by certain groups of people, so the government sets a lower limit to prevent the competition for determining low tax rates in order to increase business turnover.