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.