A judicial review hearing of Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments to hear witnesses and experts, Thursday (8/15/2024). Photo by MKRI/Zahra.

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JAKARTA (MKRI) — The Constitutional Court (MK) held a material judicial review hearing of Law No. 1 of 2022 on Financial Relations Between the Central and Regional Governments (HKPD Law) for cases No. 19/PUU-XXII/2024, No. 31/PUU-XXII/2024, and No. 32/PUU-XXII/2024 on Thursday, August 15, 2024 to hear witnesses/experts for those cases. The Petitioner of case No. 31/PUU-XXII/2024 presented law professor of Padjadjaran University I Gde Pantja Astawa as well as Agung Podomoro University law lecturer and entertainment law practitioner Riyo Hanggoro Prasetyo as experts.

Riyo explained that there are fundamental differences in the karaoke industry, even between family and executive karaoke businesses. Meanwhile, the imposition of a uniform tax rate for all types of karaoke businesses without considering the differences in operations and target markets may be unfair.

“Family karaoke businesses with smaller profit margins will be disproportionately burdened if subjected to the same tax rates as executive karaoke businesses. Too high a tax policy may force family karaoke businesses to raise prices, reducing their appeal to consumers, and even leading to closure,” he explained before the constitutional justices in the plenary courtroom.

Riyo added that the HKPD does not classify types of karaoke businesses clearly. On the other hand, regional regulations often set different classifications for similar types of entertainment, such as art performances and massage services. However, he said, the karaoke industry, which has a variety of operations and target markets, is not classified separately in the HKPD Law. This, he asserted, has caused injustice, especially for family karaoke businesses, which has to bear a disproportionate tax burden.

He also said that this ambiguity could potentially violate the principle of legal certainty as set forth in Article 28D paragraph (1) of the 1945 Constitution. Business owners are entitled to certainty on the basis for determining tax rates. This uncertainty can disrupt business operations and harm business owners and potentially affect the economy as a whole.

The Petitioner of case No. 31/PUU-XXII/2024 also presented Yessy Kurniawan, Maharani Dewi Damayanti, and Risma Situmorang as witnesses. The Petitioners of case No. 19/PUU-XXII/2024 presented Dewa Gde Putra Jayantika and Sri Rahayu Winingsih as witnesses. Meanwhile, the Petitioners of case No. 19/PUU-XXII/2024 had 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 at a hearing in July.

The norms petitioned for review are Article 55 paragraph (1) letter l and Article 58 paragraph (2) of the HPPD Law. Article 55 paragraph (1) letter l reads, “Art and entertainment services as referred to in Article 50 letter e include: l. Discotheques, karaoke, nightclubs, bars, and steam baths/spas.” Article 58 paragraph (2) 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).”

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 

Expert: SPA Is a Health Service, Not Entertainment 

Hearing on Special Entertainment Service Tax Rescheduled

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% specific goods and services tax (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.

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.

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