Jakarta, Indonesia – Spa therapist Murniati thought the worst was over after surviving the coronavirus pandemic on a meager salary.
But after the Indonesian government announced a significant increase in taxes on entertainment services, she fears the salon where she works will be forced to close and she will lose her job.
“My husband is just a taxi driver, so the total income is small. Our life, my life, depends on him and me,” she told Al Jazeera.
Murnyati is just one of countless workers across Indonesia who could be affected by plans to apply tax rates of 40 to 75 percent to entertainment services such as spas, bars, nightclubs and karaoke parlours.
The proposed price increases sparked fierce backlash from businesses, including a court challenge by a Bali spa operator.
Hariyadi Sukamdani, president of the Indonesian Hotel and Restaurant Association, said at a press conference last month that the changes “will absorb a large workforce and lead to job losses in an industry that does not require higher education.” Ordinary people.”
Amid the backlash, the government announced it would postpone the hike pending an evaluation.
“We will jointly assess what the impact will be.” [of a higher entertainment tax] This is especially true for small and medium-sized business owners,” Coordinating Maritime and Investment Minister Luhut Binsar said last month.
Still, Sophie Sulaiman, Mr Murnyati's manager at Jamu Body Treatment in Jakarta, is angry.
This spa provides work to many women, but they are not all very wealthy. Many of them are widows or single mothers, and most have been working at the spa for over 20 years.
Sulaiman said the cost of the tax increase was too high to pass on to customers and would have to be covered by his business.
“Our market is teachers. It's not businessmen, tourists or honeymooners who spend money on travel. They're just teachers, they're just housewives,” Sulaiman told Al Jazeera. .
Sulaiman said it would be impossible to make a profit under the new tax system.
“We are going to sacrifice ourselves,” Sulaiman said, adding that he may have to close. “There will be nothing left after that.”
Revenue and incentives
Economist Bhima Yudhisthira of the Center for Economic Law Research said higher taxes could increase revenue for local governments and give communities more autonomy, but a lack of consultation has divided authorities. said.
“Some local governments with huge tourist destinations like Bali are seeing this as a new tax burden post-COVID-19 rather than a potential revenue stream,” Yudhisthira told Al Jazeera told. “They will lose because the number of tourists will go down and business will be affected.”
COVID-19 has had a devastating impact on Indonesian businesses and workers, with 2.67 million jobs lost in 2020 and more than 30 million jobs lost during the pandemic, according to the National Bureau of Statistics. Micro, Small and Medium Enterprises (MSMEs) were forced to close down.
Yudhisthira said November's local elections will be particularly important as tax rates will be set by each local government under the planned tax reforms, and the government plans to provide relief and incentives to affected businesses. said he was skeptical of the promise.
He believes companies could be “handpicked” based on their political affiliations.
“We're seeing that a lot of local government incentives haven't worked well in the past. Industry executives and business owners who have strong ties to local government leaders and governors have incentives.”
Indonesia has a reputation as an affordable travel destination, but some government officials are worried that rising costs will turn away travelers on a budget in favor of big-spending travelers. expressing expectations.
Gabby Walters, associate professor of tourism and business at the University of Queensland, said such an approach was wrong.
More than a million Australians visited Bali last year, most looking for a cheap and fun holiday. According to official statistics, they account for a quarter of all tourists, making them the largest tourist group.
“[Australian] “Beach clubs and nightclubs are on the rise because tourists in Bali want to drink and party, but that's not what high-income tourists are looking for,” Walters told Al Jazeera. told. “The structure of Bali's tourism industry is designed to encourage and cater to the Balinese market.”
Walters said it's a market that could be put off by higher prices, with tourist numbers now at just over half of pre-pandemic numbers.
“If there's a 40 to 75 percent increase in buying a drink at a bar, going to a nightclub, getting a massage, people will definitely look elsewhere,” Walters said. said, noting that other destinations in the region are in decline. We have reduced taxes.
Thailand has lowered related taxes to 5% to attract tourists, and the number of tourists is rapidly increasing. More than 28 million tourists visited the country last year, while Indonesia attracted just over 9 million.
Looking ahead, Sulaiman is unsure about the future of her spa, but she is aware that she may have to close and put her staff out of work.
Like many others in the industry, she is baffled by the lack of consultation.
“I don’t think you would see a tax increase like this in other countries,” she said. “They never invited us to discuss it.”
Yudhisthira said the tax reform was being pushed too quickly and those most affected were being left out of the discussion. He believes there are other ways to increase local government revenue without hurting the entertainment industry.
“The burden on the entertainment industry is high and the number of workers laid off is high. Instead of increasing the entertainment tax, other municipal taxes should be increased,” he said.
With the outcome of the government's tax plan uncertain, legal appeals pending and local elections looming, the future of the entertainment industry is uncertain.
For workers like Murniati, so is their livelihood.
“Our lives depend on work. We are worried,” she said.
