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Tax is a mandatory deposit to the state sourced from individuals or entities and is compelling based on the 1945 law. Based on the collecting institution, taxes are divided into 2 types, namely central taxes and local taxes. Entertainment tax itself is one type of local tax. Based on Law Number 28 of 2009 concerning Regional Taxes and Levies Article 42 (1), entertainment tax is a tax imposed on entertainment services for a fee.
What constitutes entertainment tax? This is explained in Article 42 (2) which states that entertainment as referred to in paragraph (1) are:
a. Movie spectacle;
b. Performances of art, music, dance, and/or fashion;
c. Beauty, bodybuilding and similar contests;
d. Exhibitions;
e. Discotheques, karaoke, nightclubs, and the like;
f. Circus, acrobatics, and magic;
g. Billiards, golf and bowling games;
h. Horse racing, motorized vehicle, and agility games;
i. Massage parlors, reflexology, steam baths/spas, and fitness centers; and
j. Sports Matches
It should be noted that the above types of entertainment can be excluded from the imposition of entertainment tax by local regulations that have been adjusted to the characteristics of each region in accordance with article 42 (3).
Based on Law Number 28 of 2009 concerning Regional Taxes and Levies, the subject of entertainment tax includes individuals or entities that watch and/or enjoy entertainment, while the entertainment taxpayer is an individual or entity that organizes entertainment. Thus, entertainment tax is a tax that is classified as a withholding tax, which means that entertainment tax is collected by a third party, namely the individual or entity that organizes entertainment.
In the imposition of the tax, there is a percentage tax rate that can be applied by the local government according to the type of entertainment. Article 45 (1) explains that the highest entertainment tax imposition is 35%. Meanwhile, for discotheque entertainment, nightclubs, karaoke, agility games, massage parlors and steam baths/spas, the highest rate can be imposed at 75% without any minimum tax rate limit in accordance with article 45 (2) and article 45 (3) sets a maximum rate of 10% for entertainment tax on folk/traditional arts.
On January 1, 2024, a new rate has been officially implemented that refers to article 45 paragraph 2, which originally had a maximum rate of 75% without a minimum percentage rate limit. However, HKPD Law No. 1 of 2022 stipulates a change in the minimum tax rate by providing a minimum tax rate limit of 40%, which was not originally listed in Law No. 28 of 2009, especially for discotheque, nightclub, bar and steam bath/spa entertainment services.
This will certainly increase the price of rent, food and drink in the entertainment services concerned. Even with this 40% rate, Indonesia has the highest entertainment tax rate in ASEAN. Compared to other ASEAN countries. As quoted in the Bureau of International Revenue (BIR), the Philippines sets the entertainment tax at a rate of 18%. Meanwhile, through data from CNBC Indonesia, Singapore applies a rate of 15%, Malaysia 10% and Thailand 5%.
In running this latest tariff, of course, it is not an easy thing for service users or business owners to accept. There must be wisdom by the government to monitor and re-evaluate this application. Does it run optimally or even kill the business in the entertainment sector. In the long run, it will be detrimental to the local government, because it will not get the tax supply into the regional treasury. It should also be noted that in the Q1 tax realization submitted by the ministry of finance that revenue from entertainment services contributed Rp. 306.07 billion as of February 2023. Of course, this figure will be detrimental to a region if it experiences a quarterly decline in local tax revenue.
What do you think JMM friends, is the increase in entertainment tax a brilliant step for the country or will it even kill entertainment services in the country? Moreover, our country has just recovered from the non-natural disaster, namely covid-19 that befell Indonesia from 2020 yesterday. Will this step increase domestic or foreign tourists to Indonesia or vice versa. It’s interesting for us to see in the future, JMM friends. Don’t forget to comment your opinion, JMM friend. Let’s have a healthy discussion in the comments column, JMM friends.
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