The amount of tax rate, regarding which several business actors had earlier raised complaints, was discussed at a meeting attended by President Joko Widodo (Jokowi) and ministers of the Indonesian Onward Cabinet at the State Palace, Jakarta, on Friday.
"Regional governments can impose taxes lower than 40-70 percent according to each region," Hartarto remarked at the palace.
Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments (HKPD Law) stipulated that certain goods and services tax (PBJT) for entertainment services at pubs, karaoke, nightclubs, bars, and spa were set as low as 40 percent and as high as 75 percent.
The minister explained that the entertainment tax rate could be applied lower due to several provisions in the law's article that provide room for reduction.
According to Article 101 of the HKPD Law, local governments can provide fiscal incentives to business actors and entertainment services, in the form of reductions, relief, and exemption or elimination of principal taxes, principal levies, and/or sanctions.
Moreover, Article 6 of the HPKD Law regulates that local governments are prohibited from collecting any type of tax if the entertainment potential in the area is inadequate.
Hartarto noted that provisions regarding the new tax rate for the regional government in the entertainment sector will be detailed in a circular soon to be issued by the government.
"The circular letter, with the involvement of the minister of finance and the minister of home affairs, will further explain the regulation. We do not want a moral hazard, so we need an official circular," he stated.
He noted that the central government considers that fiscal incentives need to be provided to entertainment businesses as the tourism sector has just managed to recover from the impact of the COVID-19 pandemic.
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Translator: Mentari Dwi G, Resinta Sulistiyandari
Editor: Azis Kurmala
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