After Singapore raised its sales tax, Indonesia also revamped its national tax system, raising the entertainment tax rate to 40–75%. This regulation was officially adopted on December 28, 2023, and entered into force on January 1, 2024. Meanwhile, reporting and payment of this tax will start on February 1. This percentage is the very best within the region, considering Singapore has an entertainment tax of 15%, Malaysia 10% and Thailand 5%.
The law regulating tax entities for artistic and entertainment services on this country is laid out in Art. 55 No. 1 of 2022. Some of the items covered by the humanities and entertainment tax are:
A. Film screenings or other types of live audiovisual performances shown at a particular location;
B. Artistic, musical, dance and/or fashion performances;
C. beauty contests;
D. bodybuilding competitions;
to me. exhibitions;
F. circus, acrobatic and magic shows;
G. Horse racing and motorcar racing;
H. arcade games;
I. Sports games using sports and fitness facilities/areas and/or equipment and facilities;
J. recreational water rides, eco rides, educational rides, cultural rides, snow rides, safari rides, fishing, agritourism, zoos;
k. massage parlors and reflexology;
l. nightclubs, karaoke, discos, bars and steam rooms/spas.
The tax increase applies to numerous entities: discos, karaoke, nightclubs, bars and steam baths/spas, with rates starting from 40% to 75%.
In this regard, Bhima Yudhistira, Director of the Center for Economic and Legal Studies (Celios), noted that the regulation had faced severe criticism from the business community as a consequence of their limited involvement within the formulation process.
However, Yudhistira also emphasized that the newly announced regulations are still subject to revision. By issuing a government regulation replacing the Act (Perpu), this step may very well be used to invalidate certain entertainment tax provisions, including the deferral or adjustment of tax rates.
Following various criticisms of the rule, Fajry Akbar, research manager on the Indonesia Center, stated that the tax rate applied is taken into account higher in comparison with other countries, especially Thailand, which applies a rate of 5%, in accordance with CNBC. Before the tax rate increase, it was already believed that some regions in Indonesia, akin to Jakarta and Bali, had high entertainment tax rates.
Meanwhile, Center for Economic Reform (Core) Indonesia economist Yusuf Rendy Manilet added that not all regions, business groups and consumer purchasing power are capable of evenly pay a 40% tax simply to enjoy entertainment. This opinion highlights differences within the purchasing power of communities in several regions that needs to be taken under consideration when setting tax rates to make sure compliance with the principles of tax fairness.
Unlike Indonesia, Malaysia has actually reduced its entertainment tax with effect from 2024. Malaysian Prime Minister Datuk Seri Anwar Ibrahim announced in October last 12 months that the country’s entertainment tax has been reduced from 25% to 10% for international performances, with complete exemption for local artists. This decision was taken as entertainment industry players complained that the tax amount was too high.
