‘Nothing left’: Indonesia’s tourism industry fears being wiped out under tax hike | Tourism News
Jakarta, Indonesia – After spa therapist Murniyati lived with COVID-19 on a meager salary, she thought the worst was over.
But after the Indonesian government announced a huge tax increase on entertainment services, she fears the salon where she works could be closed, leaving her jobless.
“My husband is only a taxi driver so our income is low. Our life, my life, depends on him and me,” she told Al Jazeera.
Murniyati is just one of countless workers across Indonesia who could be affected by plans to impose a 40-75 percent tax rate on entertainment services such as spas, bars, nightclubs and karaoke joints .
The proposed increase has prompted strong backlash from businesses, including a court challenge by spa owners in Bali.
Hariyadi Sukamdani, chairman of the Indonesian Hotel and Restaurant Association, said in a press conference last month that the changes would lead to job losses in “a labor-intensive industry and does not require higher education, making it necessary for him. the general public.”
Amidst the blowback, the government announced it would delay the increase pending an assessment.
“We will assess together what the impact will be [of a higher entertainment tax] to be, especially for small business owners,” Coordinating Minister of Maritime Affairs and Investment Luhut Binsar said last month.
However, Sofie Sulaiman, manager of Murniyati at Jamu Body Treatments in Jakarta, is furious.
The spa provides jobs for many women, all of whom are from less affluent backgrounds. Many of them are widows and single mothers, and most have worked at the spa for over 20 years.
Sulaiman said her business will have to cover the cost of the tax increase, as it is too high to pass on to customers.
“Our market is teachers. It’s not businessmen, it’s not tourists, it’s not honeymooners who spend money when they travel. They are just teachers, they are just housewives,” Sulaiman told Al Jazeera.
Sulaiman said it would be impossible to make a profit under the new tax regime.
“We will sacrifice ourselves,” said Sulaiman, adding that she may have to close. “There’s nothing left after that.”
Income and incentives
Bhima Yudhistira, an economist from the Center for Economic and Legal Studies, said tax increases could increase revenue for local governments and give communities more autonomy, but a lack of consultation had left officials divided.
“Some local governments that have big tourist spots like Bali don’t think this is a revenue potential, they see this as a new tax burden after COVID-19,” Yudhistira told Al Jazeera. “They will lose because the number of tourists will fall and that will affect businesses.”
COVID-19 had a devastating impact on Indonesian businesses and workers, with 2.67 million jobs lost in 2020 and more than 30 million micro, small and medium enterprises (MSMEs) closed during the pandemic. spread, according to the office of national statistics.
Under the proposed tax overhaul, the rate is set by each local government, making November’s local elections particularly important, said Yudhistira, who is skeptical of the government’s promise of relief measures and incentives for businesses. which is affected.
He believes that businesses could be “selected” based on their political affiliations.
“We’re seeing that a lot of local government incentives haven’t worked well before… Business owners or business owners who have strong ties to local government leaders, to the governors, they have incentives.”
Indonesia has made a name for itself as an affordable destination, but some government officials have expressed hope that higher costs will drive away budget-minded tourists. .
Gabby Walters, associate professor of tourism and business at the University of Queensland, said such an approach would be a mistake.
More than a million Australians visited Bali last year, most of them looking for a cheap, fun holiday. They made up a quarter of tourist arrivals, making them the largest group of visitors, according to official statistics.
“[Australian] Bali tourists want alcohol, they want to party, so you’ve seen an increase in beach clubs, nightclubs and that’s not what the high-end tourists are after,” Walters told Al Jazeera. “The way Bali’s tourism industry is structured, it’s set up to promote and cater to that market. “
It’s a market that could put off higher prices, at a time when tourism numbers are just over half of what they were before the pandemic, Walters said.
“If there’s going to be a 40-75 percent increase to buy a drink in a bar or go to a nightclub or get a massage, people are definitely going to look elsewhere,” Walters said, giving note that there have been other destinations in the region. has been cutting taxes.
Thailand dropped the related tax to five percent to attract tourists and has seen an increase in arrivals. More than 28 million tourists visited the country last year, while Indonesia attracted just over nine million.
Moving forward, Sulaiman is uncertain about the future of her spa, but she knows that it is possible to close the shop and leave its employees without work.
She is upset, like many others in the industry, about the lack of consultation.
“I don’t think in any other country, you would get an increase like this in taxes,” she said. “They had never invited us to a debate.”
Yudhistira said that the tax revisions were done too quickly, with those most affected being left out of the conversation. He believes there are other ways to increase local government income without harming the entertainment industry.
“The burden on the entertainment industry is high, the number of workers who are laid off… Instead of increasing the entertainment tax they should increase the other local government tax,” he said.
With the outcome of the government’s tax plans unclear, legal appeals pending and local elections looming, the future of the entertainment industry is uncertain.
For workers like Murniyati, so is their livelihood.
“Our lives depend on our jobs. We are concerned,” she said.