The Indonesian authorities have sharply increased the regional tax on certain goods and services (PJBT) from 15 to 40 percent in Bali.
Owners of Balinese beauty salons, which fell under taxation, were shocked by such a sudden tax increase and expressed a general protest, saying that they will not raise prices for their services. At the moment, spa center managers are asking the government for a postponement of such a decision.
Impact on Balinese Businesses
Deputy chairman of the Indonesian Association of Hotels and Restaurants (PHRI) Bali I Gusti Ngurah Rai Suryavidjaya spoke on behalf of Balinese businessmen. He stated that the conditions for the business in the tourism industry are not yet stable and have not been restored after the pandemic. He hopes that the tax increase will be implemented at least gradually, for example, up to 20 percent, but not immediately up to 40.
According to Law No. 1 of 2022 on financial relations between the central government and the regional administration, the tax on certain goods and services (PBJT) is understood as a tax paid by end consumers,i.e. buyers for the consumption of certain goods and/or services. This is a tax on services provided by restaurants and other entertainment establishments,which is collected by local authorities.
In accordance with Regional Regulation of Badung Regency No. 7 of 2023 concerning regional taxes and levies, Balinese spa resorts belong to the category of tax on arts and entertainment, along with restaurants and hotels. However, according to Rai, the government should not classify all spas as entertainment. Some salons should be considered medical facilities or places providing therapeutic services. For example,massage salons are more related to health care and it is not entirely correct to classify them as entertainment establishments such as karaoke and discos. In addition,there are spa salons on the island that should be considered fitness centers.
Challenges for Bali Spa Resorts
Another reason, in his opinion,is that the increase in taxes will undoubtedly have a strong impact on the profits received by business entities. Spa resorts in Bali differ from similar places outside the island, the Balinese invest significant funds in their establishments. An increase in rates for cosmetic services will reduce customers' interest in visiting salons,and a 40 percent tax increase could kill small and medium-sized businesses, which are mainly managed by local residents.
In the near future,the Indonesian Association of Hotels and Restaurants (PHRI) in Bali will hold a forum to discuss the increase in the resort tax with a request to the Minister of Tourism and Creative Economy Sandiago Uno to justify the reasons for such a decision. The discussion will be aimed at starting a study on how much spa businesses belong to the entertainment industry. Subsequently, the results will be handed over to the Constitutional Court for consideration, as the rules for increasing the PBJT tax are already listed in paragraph 2 of article 58 of Law No. 1 of 2022.