Food and Beverage Tax Remains at 10% Despite Entertainment Tax Increase of 40-75%

Strong Growth in Tourism Sector Boosts Hotel and Restaurant Tax Revenues in Indonesia (photo: jay wennington - Unsplash)

The recent increase in entertainment taxes has sparked significant debate, particularly among business owners. In various regions across Indonesia, including Jakarta, entertainment tax rates have been raised to levels between 40 and 75 percent. Despite this hike, accommodation, food and beverage tax remain steady at 10 percent.

Minister of Tourism and Creative Economy, Sandiaga Salahuddin Uno, addressed the issue of food and beverage tax during The Weekly Brief with Sandi Uno event held at the Manhattan Hotel Jakarta.

He explained that the increased tax, now at 45 percent, allows for a differentiated approach to services. For instance, while food and beverage tax revert to the 10 percent regime, the entertainment component sees a bump to 45 percent.

To illustrate, if a tourist spends Rp 100,000 at an entertainment venue like a karaoke or nightclub, the added 45 percent tax brings the total to Rp 145,000. Conversely, if a tourist orders food or beverages worth Rp 50,000 at the same venue, the 10 percent tax adds Rp 5,000 to the bill, making it Rp 55,000.

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Sandi also mentioned that the spa industry, in collaboration with the Indonesian Hotel and Restaurant Association (PHRI), has filed for a judicial review at the Constitutional Court (MK). This move aims to bring legal clarity to the situation.

According to Law Number 29 of 2009, entertainment tax rates for establishments like nightclubs, karaoke bars, and spas were initially capped at 75 percent. However, there is no minimum limit, allowing local governments to set rates as they see fit.

Apart from Jakarta, other regions in Indonesia have also implemented specific entertainment tax rates. For example, Surakarta, Yogyakarta, Klungkung, and Mataram have set rates at 40 percent, while Sawah Lunto, Bandung Regency, Bogor Regency, Sukabumi, and Surabaya have opted for 50 percent. Meanwhile, regions like Aceh Besar, Banda Aceh, Binjai, Padang, Bogor City, and Depok have set the highest rate at 75 percent.

It’s worth noting that entertainment tax falls under the specific goods and services tax category, meaning it is applied to the final consumer. Therefore, customers bear the brunt of the entertainment tax burden.