Karaoke Bar Owner Challenges Provision on Entertainment Tax

The preliminary hearing for the judicial review of Law on Financial Relations between Central-Regional Governments for case No. 31/PUU-XXII/2024, Wednesday (2/28/2024). Photo by MKRI/Bayu.

JAKARTA (MKRI) — The Constitutional Court (MK) held the preliminary hearing of the material judicial review of Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments (HKPD Law) on Wednesday, February 28, 2024. The case No. 31/PUU-XXII/2024 was filed by Santoso Setyadji, owner of a family karaoke business. He challenges Article 58 paragraph (2) and the elucidation to Article 58 of the HKPD Law.

The Government has officially implemented the average effective rate for Income Tax Article 21 (PPh 21) per January 1, 2024. The provision has been regulated in Article 58 paragraph (2) of the HKPD Law, which reads, “Specifically, PBJT rates for entertainment services at discotheques, karaoke, nightclubs, bars, and steam baths/spas are set at a minimum of 40% (forty percent) and a maximum of 75% (seventy-five percent).”

Before Constitutional Justices Enny Nurbaningsih (panel chair), Anwar Usman, and Arsul Sani, legal counsel Adong N.M.P. Simanjuntak argued that the a quo article is unconstitutional. The Petitioner believes that the HKPD Law contains a change in specific goods and services tax (PBJT) on arts and entertainment, which he believes is discriminatory.

Prior to the provision’s enactment, business owners had paid taxes to the regional government following existing regulations. The Petitioner argues that the latest PBJT tariff of at least 40% would impact his consumers, who would bear the brunt of the increase. He believes consumers would think twice about the costs of goods and/or services they purchase, as the costs would not include the high tax.

Therefore, the Petitioner requests that the Court add the phrase “except for family karaoke business” in Article 58 paragraph (2) of the HKPD Law and to declare Article 58 of the HKPD Law unconstitutional and not legally binding.

Justices’ Advice

In response, Justice Arsul Sani advised the Petitioner to revise the argument for his legal standing following the company’s statute. “The legal standing and background of the petition may also be strengthened. The touchstones are not only one [article] of the 1945 Constitution. What I mean is what is the loss of Article 28 [of the 1945 Constitution]? Please elaborate the loss one by one so that it would be better and argumentative,” he said.

Justice Enny highlighted the same thing. She also asked the Petitioner to strengthen his legal standing and elaborate the loss suffered by his company and himself as a business owner. “Please strengthen [the legal standing] and provide more details,” she said.

At the end of the hearing, the justice panel gave the Petitioner 14 days to revise the petition and submit it by Wednesday, March 13 at 09:00 WIB.

Author       : Utami Argawati
Editor        : Lulu Anjarsari P.
PR            : Fauzan Febriyan
Translator  : Yuniar Widiastuti (NL)

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian versions, the Indonesian version will prevail.

Wednesday, February 28, 2024 | 16:35 WIB 78