Minister of Economic Affairs Airlangga Hartarto has announced the development of incentives in response to the increase in entertainment tax for specific venues, rising from the previous 35 percent to a new range between 40 and 70 percent.
This adjustment in tariff rates is outlined in Law Number 1 of 2022, focusing on the Financial Relations between the Central Government and Regional Governments (HKPD), particularly targeting venues such as nightclubs, karaoke establishments, nightclubs, bars, and steam baths/spas.
According to Airlangga, Article 101 of the mentioned law provides flexibility for the government to introduce fiscal incentives through subsequent regulations, aiming to facilitate business operations despite the tariff increments.
“Incentives can be granted to support investment ease, encompassing reductions, exemptions, and elimination of principal taxes, levies, and associated sanctions,” stated Airlangga during a press conference at the State Palace on Friday (January 19).
Details regarding the incentives will be disclosed through Circular Letters from the Minister of Finance, serving as the state treasurer, and the Minister of Home Affairs, responsible for overseeing regional governments.
“To clarify matters, the government will release a circular letter addressing Article 101, jointly presented by the Minister of Finance and the Minister of Home Affairs,” explained Airlangga.
Additionally, Airlangga mentioned that certain regional governments have the authority to set specific entertainment taxes below the minimum 40 percent, aligning with their regional capacities. A comprehensive explanation of this allowance will be provided in the Circular Letter issued by the Minister of Finance and the Minister of Home Affairs.
“The joint circular letter will elaborate on these points, ensuring that the discretionary nature of the law avoids any potential moral hazards,” Airlangga concluded.
Within the HKPD Law framework, the government has established entertainment tax specifically ranging from 40 to 70 percent for targeted venues. Meanwhile, other entertainment taxes are uniformly set at 10 percent.