Indonesian Govt Delays Film Tax Review Decision

The Jakarta Globe

If you have been waiting patiently for the past month, popcorn box in hand, to find out whether there will be any fresh Hollywood films to watch on the big screen anytime soon, you may have to keep on waiting.

The government on Wednesday failed to come out with a promised decision on the tax on imported films, saying negotiations hadn’t concluded yet.

Culture and Tourism Minister Jero Wacik, who had earlier promised that Wednesday would be the day he would reveal a decision on the tax issue that has led foreign film importers to stop bringing in new titles, said the scheme had yet to be finalized.

“We cannot announce the exact film tax scheme yet because it is still being discussed, taking into consideration three regulations, on customs, tax and also films,” Wacik said.

The policy in question led to members of the Motion Picture Association deciding to halt exports of films to Indonesia.

The core of the issue lies in the calculation of the customs value of imported films, which was previously based on the physical length of the film roll, with each meter valued at 43 cents. But the government now wants to tax royalties up front under a 2006 customs law that stipulates that royalties should be included in the import tax.

The government, though, has sent out mixed messages. While the Directorate General of Customs and Excise has appeared resolute about implementing the new royalty computation, the Culture and Tourism Ministry has maintained that the government was open to negotiations with film importers.

“I want to make sure that foreign films are still entering Indonesia,” Jero reiterated on Wednesday. He did not elaborate on the statement, instead announcing that a separate import tax on film production equipment would be scrapped to help give Indonesian film producers a boost.

The Tourism Ministry has previously said boosting the local film industry was the rationale behind the new royalty policy.
“President Susilo Bambang Yudhoyono suggested developing the national film industry by reducing taxes for Indonesian filmmakers, so we are going to apply a zero percent tax on film production equipment,” Wacik said.

He said film production equipment and materials have always been listed as luxury items and therefore were slapped with high taxes.

“Other than that, we are going to reduce the value-added tax to a minimum level,” he said, without elaborating.
Wacik said the country’s current film production levels were not in a position to meet the demands of the 672 screening houses across the nation.

“That is why foreign films are needed, to meet the demand of the screens and also to become references for Indonesian filmmakers to improve the quality of their films,” Wacik said. “We do not want to create a policy that hurts many people, including Hollywood film fans and cinema employees.”

Wacik said the tax regime on imported films was aimed at protecting the national film industry while at the same time not harming foreign film imports.

“We just want to see foreign films enter Indonesia without violating the regulations. So far, the Directorate General of Taxation has decided on a tax scheme, but it has yet to finalize their decision,” he said.

In order to help increase public assess to films, Wacik said his ministry proposed to have dozens of film projection cars available in 2012 to cater to areas without cinemas.

“This idea is basically to bring films to all Indonesian citizens. In that way, films will be a form of entertainment not only enjoyed by city people but also by people from small towns or small villages.” Jero said.

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