Business Owners Questions Entertainment Tax Rates
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Several owners of entertainment businesses challenging Law on Financial Relations between Central-Regional Governments, Thursday (2/29/2024). Photo by MKRI/Bayu.


JAKARTA (MKRI) — Several owners of entertainment/service businesses have filed a material judicial review petition of Article 58 paragraph (2) of Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments (HKPD Law), which regulates specific goods and services tax (PBJT) rates on certain businesses. It 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).”

The petition No. 32/PUU-XXII/2024 was filed by business owners who represent six legal entities in tourism and service/entertainment: central executive board of the Indonesian Tourism Industry Association (DPP GIPI), PT Kawasan Pantai Indah, CV Puspita Nirwana, PT Serpong Abadi Sejahtera, PT Citra Kreasi Terbaik, and PT Serpong Kompleks Berkarya. They admitted to have had constitutional impairment due to Article 58 paragraph (2) of the HKPD Law. They allege that it is in violation of Article 27 paragraph (2), Article 28G paragraph (1), Article 28H paragraph (1) of the 1945 Constitution.

“The existing preferential treatment is discriminatory against five types of entertainment and, thus, lead to material and constitutional loss for the Petitioners,” said legal counsel Muhammad Joni at the preliminary hearing on Thursday, February 29, 2024.

The Petitioners believe that discotheques, karaoke, nightclubs, bars, and steam baths/spas are ordinary, not luxury business, and do not need to be controlled.

Impact of COVID-19 Pandemic

In addition, the Petitioners asserted that the assumption that the entertainment industry has bounced back from the extraordinary COVID-19 pandemic was inaccurate. This is shown in revenues from entertainment tax. Before the pandemic, the entertainment led to 2.4 trillion rupiahs in tax revenues, while it only reached 787 million in 2020. In 2021, it nosedived to 477 million.

“Therefore, using the assumption that the entertainment [industry] has recovered to justify high entertainment tax as Article 58 paragraph (2) does is groundless,” Joni explained.

In the petitum, the Petitioners appeals to the Court to declare Article 58 paragraph (2) of the HKPD Law unconstitutional and not legally binding.

Justices’ Advice

The hearing was presided over by Constitutional Justices Arief Hidayat, Enny Nurbaningsih, and Ridwan Mansyur. Justice Enny said the Petitioners should elaborate on who have the right to represent the legal entities to litigate in the Constitutional Court based on their statutes/bylaws.

“Please mention whether the executive director has the right to represent [each legal entity] or if other elements are necessary. Include the statute/bylaws and evidence. There should not be any statement later on that the Petitioners are not authorized to represent the legal entities,” she said.

She also reminded the Petitioners to explain more the contradiction between the norm being reviewed and the touchstones in the 1945 Constitution. Justice Ridwan Mansyur also said that the Petitioners should elaborate one by one the contradiction between the a quo article and the articles in the 1945 Constitution used as touchstones.

He also advised the Petitioners to compare the regulation in the a quo article and previous legislation as well as the tax rate imposed on entertainment/service business before Article 58 paragraph (2) of the HKPD Law was in effect.

“Elaborate it clearly and in detail. Also make an argument on the reason systematically and clearly how the norms being petitioned and the touchstones contradict,” he said.

Justice Arief added that the Petitioners should revise the petitum, because it the article is declared unconstitutional, the entertainment/service business mentioned in it would not be taxed. They can propose an alternative provision instead.

Before concluding the hearing, Justice Arief announced that the Petitioners should revise the petition and submit it by Wednesday, March 13 at 09:00 WIB to the Court.

Author       : Mimi Kartika
Editor        : Nur R.
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.


Thursday, February 29, 2024 | 14:21 WIB 122