According to the HKPD Law, tax rates for certain goods and services related to entertainment services offered at discotheques, karaoke, night clubs bars, and steam baths/spas are set at a minimum of 40 percent and a maximum of 75 percent.
Jakarta (ANTARA) - The government will soon issue a circular concerning fiscal incentives related to the imposition of tax rates for special entertainment services currently standing at 40-75 percent, Coordinating Minister for Economic Affairs Airlangga Hartarto stated.

The minister made the statement after attending a meeting held to discuss business players' complaints about the current tax rates stipulated in Law Number 1 of 2022 concerning Financial Relations between the Central Government and Regional Governments (HKPD Law) in Jakarta on Friday.

"The government will issue a circular regarding Article 101 (of the HKPD Law). The finance minister and home affairs minister will prepare the circular," he remarked at the Presidential Palace, Jakarta.

Article 101 of the HKPD Law regulates the regional governments' authority to 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.

The article states that incentives are aimed at providing a sound level of convenience to business players in investing their capital.

Hartarto noted that during the meeting, President Joko Widodo suggested additional types of incentives to be offered, such as the corporate income tax (PPh) incentive of 10 percent.

"Mr. President demanded that we study the feasibility of offering a corporate PPh incentive of 10 percent," he remarked.

The minister stated that the circular letter will be disseminated following its issuance.

The government is regulating tax rates for the entertainment sector both through Government Regulation No. 12 of 2019 concerning regional financial management as well as the HKPD Law.

According to the HKPD Law, tax rates for certain goods and services related to entertainment services offered at discotheques, karaoke, night clubs bars, and steam baths/spas are set at a minimum of 40 percent and a maximum of 75 percent.

The minimum rate was set based on the fact that the services offered at such places are relatively exclusive to certain groups of people. Hence, the government decided to take a measure for preventing competition in setting low tax rates among regional governments.

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Translator: Mentari D, Tegar Nurfitra
Editor: Arie Novarina
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