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Entertainment tax hike could backfire on government: Enggartiasto

Jakarta Globe - February 8, 2024

Alfida Rizky Febrianna, Jakarta – Former Trade Minister Enggartiasto Lukita recently expressed concerns that the implementation of new entertainment taxes, reaching up to 75 percent, could discourage the industry and potentially lead many businesses to collapse, particularly those not fully recovered from the impact of the Covid-19 pandemic.

Enggartiasto warned about the severe consequences of such a tax hike on the entertainment sector. He said the idea of increasing state revenues through higher taxes might have negative repercussions when the increase surpasses a bearable threshold.

Before the recent hike implemented last month, entertainment taxes were capped at 15 percent.

"The tax hike can harm the industry and reduce state revenue from this particular sector," said Enggartiasto, himself a businessman. He made these comments during the Investor Daily Roundtable in Jakarta on Wednesday evening.

"When that happens, related businesses will earn reduced income and may have to downsize their workforce. Mass layoffs could lead to a decrease in state revenue from individual income taxes. If many companies go bankrupt, revenues from corporate income taxes will also decline. There are numerous potential risks associated with this tax hike," he said.

The government recently imposed new taxes ranging from 40 percent to 75 percent on establishments like bars, nightclubs, spas, and karaoke houses. This move sparked strong reactions from industry associations.

Although the tax hike is based on a new law proposed by the House of Representatives, several top government officials have signaled opposition to its implementation. Some individuals have even filed a motion with the Constitutional Court seeking to repeal the law.

"I regret that lawmakers from the House's Commission IX have initiated this without first calculating its future impacts," added Enggartiasto.

Source: https://jakartaglobe.id/business/entertainment-tax-hike-could-backfire-on-government-enggartiast