Tax on Imported Films Joined by New Levy on Digital Movies From Overseas

The Jakarta Globe

Camelia Pasandaran & Elisabeth Oktofani

The long-running saga that swept blockbuster Hollywood movies off Indonesian screens took a new twist on Tuesday as the government announced it would impose a new tax on certain imported films.

Under the new proposal, the tax will only be applicable to movies imported in digital format and as such cannot be calculated based on footage, according to Syamsul Lussa, director of films at the Culture and Tourism Ministry.

“We’re living in the digital era but our tax policy is still based on the length of film reels,” he said.

“So we’re going to establish a tax scheme for digital films that will be calculated based on the running time. So for any foreign films entering Indonesia in digital format, the customs officials and importers will not be confused about how to calculate the tax.”

However, most of the movies imported to Indonesia are on film, not digital. The latter format is most commonly used for certain three-dimensional movies.

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

At the heart of the issue is the calculation of the customs value of imported films, which was previously based on the physical length of each film reel, with each meter valued at 43 cents. But the government sought tax royalties up front under a 2006 customs law that stipulates that royalties should be included in the import tax.

Culture and Tourism Minister Jero Wacik said he had agreed with the finance minister on the taxation method for digital films, but had not yet decided on how to calculate it.

“It needs to be reported to the president first, because tax issues are under the authority of the president to decide,” he said.

He added that the single tax meant that motion picture importers would only be required to pay once at the customs office.

“There will be no more tax afterward or in the middle [of the movie’s run],” Jero added.

He said the new tax policy would help to protect the local film industry, which is also expected to benefit from a tax break.

Of the around 600 screens at all theaters in Indonesia, only 100 are used for local movies, the minister said, adding that he hoped to increase that number to 200 by 2014.

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