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West Sumatra and West Java follow Bali's lead in lowering entertainment tax

Jakarta Globe - January 30, 2024

Arnoldus Kristianus, Jakarta – West Sumatra and West Java have joined Bali in implementing an entertainment tax of less than 40 percent for establishments like nightclubs, karaoke spots, bars, and spas, as announced by Home Affairs Minister Tito Karnavian.

"There are some regions that have lowered the tax rates. West Sumatra and West Java have reduced the rates," Tito said in Jakarta on Monday.

The government recently imposed tax hikes on entertainment venues such as nightclubs, bars, karaoke houses, and spas to reach 40-75 percent, from only 15 percent previously.

"They have held meetings inviting entertainment venue owners, and they will provide incentives. How much (is the tax)? Definitely below 40 percent," Tito told reporters.

The Jakarta Globe previously reported the Badung Regency Government in Bali will maintain the current tax rate at 15 percent.

According to the Law on Financial Relations between the Central Government and Regional Governments (HKPD), regional heads have the authority to grant fiscal incentives to entrepreneurs operating within their jurisdictions.

The fiscal incentives involve reductions, reliefs, exemptions, cancellations, or deferments of payments on the principal tax or levy provided by regional heads. Business owners are required to justify their request for tax incentives to the regional head by submitting a financial report. Subsequently, the head will review the report to determine the eligibility for the incentive.

The introduction of tax rates between 40 percent to 75 percent caused concern among entrepreneurs in these sectors, fearing financial losses for their businesses, which employ approximately 20 million people. Now, business owners are seeking a legal review of the law.

"It is the business owner's right to pursue a judicial review, and we welcome it. If they succeed, we will change it," Tito said.

Source: https://jakartaglobe.id/business/west-sumatra-and-west-java-follow-balis-lead-in-lowering-entertainment-ta