Accounting lecturer of the University of Indonesia Sandra Aulia testifying as an expert for the Petitioners, Wednesday (8/28/2024). Photo by MKRI/Ifa.
Accounting lecturer of the University of Indonesia Sandra Aulia testifying as an expert for the Petitioners, Wednesday (8/28/2024). Photo by MKRI/Ifa.
JAKARTA (MKRI) — The Constitutional Court (MK) held another 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 Wednesday, August 28, 2024 to hear witnesses and experts.
The Petitioners No. 32/PUU-XXII/2024 accounting lecturer of the University of Indonesia Sandra Aulia and expert on regional autonomy Djohermansyah Djohan. Sandra said that the policy on the minimum rate of specific goods and services tax (PBJT) in the articles in the HKPD Law petitioned for review has created a domino effect, thus leading to growing unemployment.
“The dominant effect will be a lot of multiplier effects, for example, sales are reduced but the expenses that must be borne remain. For example, if we break it down, the fixed costs and variable costs remain. We reduce the fixed costs because sales are reduced, so when the fixed costs are reduced, it means that when we have employees, the employees are laid off. So, the effect is that yes, maybe we will contribute to unemployment in terms of multiplier effect,” she said before eight constitutional justices in the plenary courtroom.
Sandra continued, when the variable cost is reduced, the multiplier effect affects the supply chain, such as spices used in the SPA business. So, she asserted, the minimum tax rate of 40 percent could cause a multiplier effect that exceeds that tax rate.
She also questioned the basis for the grouping and rates imposed. She believes the policymaking of PBJT rates on entertainment services had not involved the community, stakeholders, and disregarded the principles of good public policy or tax policy, including lacking optimal synchronization of regional policies, the function of taxes as a social, political, and economic policy, as well as justification for the application of the principle of fairness/neutrality.
Thus, Sandra recommended that the PBJT tariffs on entertainment be reviewed by involving relevant stakeholders and using supporting academic paper through an analytical study of its implications for the life of society and the state. In addition, she said PBJT should not be levied on SPA businesses as they are a type of traditional health service regulated by the Health Law. She urged that PBJT policies and regulations on SPA be harmonized with other policies. She also stressed that the taxation policy on entertainment services needs to be formulated comprehensively, holistically, and impartially by considering the economic and social multiplier effect.
Meanwhile, Djohermansyah argued that Article 58 paragraph (2) of the HKPD Law on the determination of PBJT tariffs on five entertainment services has harmed the Constitution and also weakened reform regional autonomy, so it deserves annulment by the Court. Meanwhile, the provision of fiscal incentives regulated in Article 101 of the HKPD Law in practice has complicated procedures, he said, so it will not help the regional head much in realizing equitable local taxes.
“Therefore, we appeal to the Court to annul it and declare it not binding,” he said.
Witness Statement
In addition, the Petitioners of case No. 32/PUU-XXII/2024 also presented a witness, head legal and governance relations manager of HW Group Wirawan Nurisa Saputra. Meanwhile, as chairperson III of the Association of Husada Tirta Indonesia Entrepreneurs (formerly ASPI) as well as Director of PT Mustika Ratu Tbk Kusuma Ida Anjani testified as a witness for the Petitioners of case No. 19/PUU-XXII/2024.
Kusuma stated that SPA activities that use jamu (Indonesian traditional herbal medicine) and boreh (a natural scrub made of natural spices) have long been recognized as efforts to maintain a balance between body, mind, and spirit as the main principle in traditional Indonesian health. This is a form of health service that prioritizes prevention and maintenance of overall health, not just for entertainment or recreation.
“Therefore, it is very inappropriate to categorize SPA activities that use jamu and boreh as entertainment. This practice is not entertainment, but a serious effort to maintain a healthy body and mind through traditional methods that have been proven effective and recognized worldwide,” Kusuma explained.
She added that her association had never been involved in the drafting of the academic paper of the regulation on PBJT tariffs on SPA services. In fact, she said, ASPI continues to fight to maintain the existence and integrity of the SPA industry in Indonesia and plays an active role in drafting and formulating the Health Law throughout Law No. 23 of 1992, Law No. 17 of 2023, as well as implementing regulations such as Regulation of the Minister of Health No. 1205 of 2004.
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
Expert: Same Tax Rates on Different Entertainment Services Unfair
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).”
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.
Wednesday, August 28, 2024 | 15:06 WIB 92