The Petitioners attending a judicial review hearing of the Law on Financial Relations between Central-Regional Governments, Wednesday (7/24/2024). Photo by MKRI/Ifa.
JAKARTA (MKRI) — The Constitutional Court (MK) held a hearing to hear experts for Petitioners for three cases: No. 19/PUU-XXII/2024, No. 31/PUU-XXII/2024, and No. 32/PUU-XXII/2024 on the material judicial review of Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments (HKPD Law) on Wednesday, July 24, 2024. The Petitioners question specific goods and services tax (PBJT) for arts and entertainment services on discotheques, karaoke, nightclubs, bars, and steam baths/spas at 40-75 percent.
The Petitioners of case No. 19/PUU-XXII/2024 presented Udayana University’s constitutional law expert Yohanes Usfunan, University of Indonesia’s tax policy professor Haula Rosdiana, and head of the development of tourism business certification of the Association of Indonesian Tourism Business Certification Activities (PKSUPI) Mohammad Asyhadi.
Yohanes believes the categorization of spas into entertainment businesses in the HKPD Law is discriminatory, in violation of the right to a healthy life, and thus unconstitutional.
“Some say that massage or spa is a luxury, but I don’t think so; it’s a human right,” he said in the plenary courtroom.
He explained that the concept of traditional health service businesses is very different from that of entertainment businesses because for consumers who feel tired or exhausted and unhealthy, spa has benefits for their health or fitness. Miscategorization can actually cause problems such as hindering people from improving their standard of living, creating obstacles in labor-intensive industries, hindering employment, and hindering the improvement of the community’s economy.
Haula continued that spa should indeed be capitalized because it stands for “Sehat Pakai Air” or Salus Per Aquam or “Sanitasi Per Aquam,” meaning “health by means of water,” which is part of health services. She said that 55 paragraph (2) and Article 58 paragraph (2) of the HKPD Law shows how one of spa’s purposes is seen to reflect the cost of negative externalities
This is contrary to the Health Law, which emphasizes that spa, which is a cultural heritage that has a lot of local wisdom, is actually part of healthcare. “Academically, from the legal character of the tax, there is actually a contradiction when SPA is considered as entertainment, it becomes very contradictory to the Health Law,” she explained.
Harmonization Required
In addition, the regulation of PBJT on spa services contradicts the VAT policy on medical health services and does not meet the principle of neutrality, so it is distortive to encourage the Healthy Indonesia Program to improve the welfare of the community. Before the HKPD Law, spas were the object of entertainment tax equivalent to massage parlors, reflexology, steam baths/spas, and fitness centers. The maximum tax rate was 75 percent and there was no lower limit. Meanwhile, after the HKPD Law, spas are the object of PBJT for arts and entertainment services equivalent to discotheques, karaoke, nightclubs, and bars, and there is a lower limit tax rate of 40 percent.
Haula said local tax policies and regulations on spa services need to be harmonized with VAT policy on health services. The taxation policy on spa services needs to be formulated in a comprehensive, holistic, and impartial manner by considering the multiplier effect both economically and socially.
Also read:
Business Owners Ask Spa to Be Excluded from Art and Entertainment Category
Petitioners: Spa Businesses Could Go Under Due to 40 Percent Tax
Karaoke Bar Owner Challenges Provision on Entertainment Tax
Karaoke Bar Owner Revises Petition on Entertainment Tax
Business Owners Questions Entertainment Tax Rates
Business Owners Ask Entertainment Tax Be Capped at Ten Percent
Govt: High Tax Rates for Discotheques and Spas as Non-Basic Needs
The Petitioners of case No. 19/PUU-XXII/2024 feel they were disadvantaged because their spa business, which is in the health category, has been categorized as providers of art and entertainment services alongside discotheques, karaoke, nightclubs, and bars. Consequently, they must pay 40-75% PBJT imposed by the regional government. Meanwhile, only 10% PBJT is imposed on massage and reflexology businesses. They ask that steam baths/spas be excluded from art and entertainment services.
Meanwhile, 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 the enforcement of Article 58 paragraph (2) of the HKPD Law. Article 58 paragraph (2) of the HKPD Law 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 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. 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.
Author : Mimi Kartika
Editor : Lulu Anjarsari P.
PR : Tiara Agustina
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, July 24, 2024 | 14:30 WIB 81