Misunderstanding Over Film Tax: Indonesian Govt

The Jakarta Globe

Foreign-film fans in Indonesia may still have reason to hope after a Finance Ministry official on Monday said the controversy over the tax on imported films was all a misunderstanding.

Thomas Sugijata, director of excise at the ministry, said there was in fact no new tax policy on imported films.

Foreign distributors on Thursday said they were halting the supply of imported films, believing the government was imposing a hefty additional tax.

The boycott meant that Indonesian fans would be denied seeing imported films, including the top overseas blockbusters.

“What there actually is,” Sugijata said, “is a reassessment of the customs value of imported films.” He added that the National Film Development Agency (BP2N) in February last year sent a letter recommending a reassessment of the customs value, which it said was too low.

The result, he said, was that foreign distributors would now be paying higher fees up front, but possibly lower fees on the back end.

“The royalty element was incorporated in the import value,” he said, which resulted in a higher customs value for the films. Previously, royalty payments were only calculated after a film had been distributed.

“This is really purely a matter of correct assessment, in line with the regulations.”

Heri Kristiono, a customs and excise technical director at the Finance Ministry, told reporters separately that the law on customs stipulates that royalties should be included in the import tax calculation.

“We plan to reassess the value this year,” Heri said. The royalty value, he said, depended on the agreement between the foreign distributor and the importer.

Heri said that the tax office had ratified the WTO Customs Valuation Agreement, which states that in determining customs values, royalties — such as payments in respect to patents, trademarks and copyrights — should be included.

The foreign film distributors may have seen the higher taxes on imported films as the results of a new tax, he said, while the reason for the higher figures was the incorporation of royalty fees into the customs values.

Based on the current tax law, importers pay 23.75 percent of the film’s customs value, including import tax, value added tax and income tax.

Previously, royalties were not calculated because distributors argued that the amount would only be known after the film had been released, Heri said.

“Importers should know this. There are no problems with other royalties such as for books and music,” he said.

Darussalam, a tax expert from the University of Indonesia, said that such disputes in interpretation were always problematic in determining customs values across the world.

“There is nothing wrong with the government attempt to determine customs values based on royalties,” Darrusalam said.

Heri said the customs value of imported films had previously been based on the physical length of the film roll, with each meter valued at 43 cents.

“Therefore, there is no new levy or increase in import duty fees on imported film.”

Heri added that on Friday, the Directorate General of Customs, the Motion Picture Association and foreign film producers such as Walt Disney, Time Warner and Sony Pictures had discussed the newly appraised customs value of imported film. “Actually they have responded to us positively.

“However, they were to write to us about their concerns and objections, which we have not received until now.”

Tax schemes for local films also are being assessed.

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