As a judicial review gets underway in Indonesia to establish whether the government can or should increase the entertainment tax to 40%, key business figures are making their objections known.
Hotman Paris, who is a big public figure in Indonesia, is making his objections to the government’s plans to increase the entertainment tax.
Hotman Paris is a lawyer, TV show host, and one of the co-founders and lead investors of Atlas Beach Club in Canggu.
In social media protests and conversations with the press, Paris is threatening to move his investments to other countries in Asia.
He has mentioned moving funds to Malaysia and Dubai and even said “Goodbye Indonesia” in his discourse.
As Hotman Paris and other leading entertainment and hospitality industry entrepreneurs continue their campaigns to get the new policies scrapped, Indonesia’s Minister for Tourism and Creative Economies, Sandiaga Uno, remains very grounded in his communication.
Minster Uno has responded to Hotman Paris’ protest, saying, “We certainly appreciate that the investments made by Hotman and his friends can open up business opportunities and employment opportunities, but we have a tax regime.”
“We use this tax regime not only for aspects of state revenue but also for regulation, compliance, and how we “can orchestrate Indonesia’s development towards a golden Indonesia 2045.”
Minster Uno noted that there are big foreign investors who are more than happy to keep pouring investment into Indonesia and that he’s not too worried at this point.
He explained, “Of course, we want to convince investors to invest their funds as much as possible. In fact, when I went on a roadshow to Dubai and Saudi Arabia, there was a lot of interest from foreign investors to invest in Indonesia.”
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The Tourism Minister made it clear that Sandiaga is aware that the challenge for the government is how to make domestic investors feel at home and not withdraw their investments or even move abroad.
He added, “But what is a test case is how domestic investors who have invested here and clearly live in Indonesia are comfortable investing in Indonesia. That’s what we do; we continue to communicate with Bang Hotman.”
Minister Uno also explained that he had invited Hotman Paris to discuss at the Ministry of Tourism and Creative Economy today, but Hotman did not attend.
So what is this saga really about? And should tourists be concerned that their vacations are about to get even more expensive?
Referring back to comments made by Minister Uno last week at the announcement of the judicial review, “No one has been harmed, no one has been killed. We must not be too polemical so that it creates negative perceptions [about Indonesia and the entertainment industry].”
The new tax increase has been postponed as the judicial review is underway, though if the courts go in the government’s favor, these taxes could be introduced in the next few months.
The tax rate in question affects certain entertainment services such as discos, karaoke, nightclubs, bars, and steam baths or spas could soon be set at 40-75 percent.
These laws are contained in the list of Certain Goods and Services Tax (PBJT) in Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments (UU HKPD).
The backlash to the new tax rates is two-fold. Not only are venues and businesses classed in the entertainment sector protesting the tax increases, but spas are calling to be excluded from the list.
Until now, spas have not been included as entertainment venues in Indonesia and have not been taxed as such.
These new rules would see spas, steam baths, and some wellness facilities included as entertainment venues, meaning businesses and patrons would be required to pay 40% for these services.
A move that many small beauty parlors and spas say would mean they had no option but to close their doors forever.
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