Raising entertainment tax

Raising entertainment tax

Taxation has become one of the hottest issues in this country
in recent months. While the directorate general of tax has yet to
slow down its aggressive campaign to collect taxes from
individuals, Jakarta deputy governor Fauzi Bowo said on Tuesday
that the city administration expected a 25 percent increase in
entertainment tax receipts to Rp 150 billion (US$15 million) next
year from a targeted Rp 120 billion this year.

Fauzi's threat that entertainment center owners faced punitive
actions for evading their tax obligations obviously reflects the
administration's determination to collect more taxes from that
sector.

Motor vehicle taxes are currently the largest source of
revenue for the city administration. But the city's streets are
already overcrowded and vehicle tax revenues will soon peak, thus
the administration now has to look to other sectors to fill its
coffers.

Jakarta expects to collect Rp 2.35 trillion from vehicle
registration fees in 2006, 21.38 percent more than the 2005
target. Car ownership tax receipts are also expected to increase
to Rp 2.70 trillion from Rp 2.48 trillion, fuel tax revenues from
Rp 305 billion to Rp 575 billion, hotel tax revenues from Rp 400
billion to Rp 500 billion and restaurant tax revenues from Rp 330
billion to Rp 400 billion.

The plan to collect even more revenue from the entertainment
sector shows that the city administration wants to gradually
decrease its heavy dependence on revenues from motor vehicle
taxes through a more aggressive collection of taxes in the
entertainment industry.

However, it is surprising to learn that the administration
itself seems to suspect that many entertainment centers have been
"dishonest" in reporting their revenues in order to evade taxes.

The administration's plan, however, immediately evoked a
negative reaction from entertainment center owners. Chairman of
Association of Indonesian Entertainment Center Owners Adrian
Maelite said that paying more tax would deal a severe blow to the
entertainment industry, which he described as already on the
brink of bankruptcy.

Adrian argued that many entertainment centers have been
suffering financial losses due to massive antidrug campaigns by
police that have had the effect of discouraging people from
frequenting these centers. Records made by the association
indicated that as many as 120,000 employees, or 30 percent of the
400,000 people working in the entertainment industry in the
capital, had been laid-off temporarily following a series of drug
raids.

It is a fact that drug trafficking does in fact take place in
nightspots, and therefore police raids are justified to some
degree. However, most of the raids have violated the principle of
the presumption of innocence. With TV television camera crews in
tow, scenes from the police raids on entertainment centers are
broadcast, ignoring the fact that the majority of patrons are not
drug dealers or users. Such sloppy raids have had a discouraging
impact on nightspot patronage.

Both the city administration and the owners of the
entertainment centers have their own reasons to stick to their
arguments. But one thing worthy of note is the fact that Jakarta,
as a megalopolitan city, deserves bigger and better entertainment
centers, and a lively, decent nightlife.

It is also well known that the administration has not done
enough to protect entertainment centers, including nightspots,
from illegal actions by groups claiming to represent religion.
There are times during the Islamic fasting month of Ramadhan when
mobs attack nightspots for various reasons, without any concrete
effort from law enforcers to stop them. Legal proceedings against
the perpetrators never seem to occur.

Meanwhile, during the "normal months", entertainment center
owners are busy dealing with certain police or military officers
who come after midnight asking for uang keamanan (money for
security services). Consequently, for all these reasons, the
entertainment sector has become a high-cost industry.

It is high time for the administration to change its mind-set.
If the entertainment centers are expected to become a significant
source of revenue, then they must be given adequate protection
from harassment.

Jakarta, one of the world's largest cities, needs a vibrant
entertainment sector, and the people of Jakarta deserve this.
However, the industry needs a healthy climate in order to grow,
which in turn will bring in more revenue for the administration
and at the same time provide many Jakartans with jobs.