The recent implementation of a new regional tax regulation in Jakarta has ignited a wave of debate within the city’s health and fitness industry. Under Regional Regulation No. 1 of 2024, sports facilities such as fitness centers, gyms, and yoga studios are now being categorized similarly to entertainment venues, making them subject to an entertainment tax ranging from 10 percent to 40 percent.

The policy has triggered strong reactions from business owners, health advocates, and the general public who argue that the classification is inappropriate and could discourage healthy lifestyles. This article explores the underlying issues of Jakarta’s sports tax policy, the perspectives of key stakeholders, and the broader implications for the health and wellness sector.

Understanding the New Jakarta Sports Tax Policy

What the Regulation Says

The Jakarta Regional Regulation No. 1 of 2024 consolidates several local tax categories, including restaurant tax, hotel tax, parking tax, and entertainment tax. Under this regulation, the city government now includes sports venues as part of the entertainment category. This means any fitness or sports-related establishment that charges for access or membership can be taxed up to 40 percent depending on the service.

While the regulation technically applies only to facilities that provide paid sports services, the language has caused confusion. Business owners and customers fear the broad classification may eventually affect community sports clubs, martial arts dojos, dance studios, and swimming pools.

Justification by Jakarta Authorities

Officials from the Jakarta Revenue Agency (Badan Pendapatan Daerah DKI Jakarta) have stated that the new regulation is a national mandate under Law No. 1 of 2022 on Financial Relations between the Central and Regional Governments. They argue that the city is merely following central directives and that taxation does not aim to discourage sports but ensure fair contribution from all commercial entertainment sectors.

The Revenue Agency clarified that free community-based sports or school facilities will not be subject to the entertainment tax. However, this clarification has not fully addressed public concerns.

Business and Public Backlash

Impact on Gym and Fitness Center Owners

Gym owners across Jakarta have raised concerns about the financial burden the tax could impose. Many gyms already operate on thin margins due to competition and high overhead costs. The added tax pressure could result in increased membership fees or even force smaller studios out of business.

Some gym owners, such as those managing boutique fitness brands, argue that their services promote public health and should not be treated the same as karaoke lounges, nightclubs, or cinemas. They believe the new classification shows a lack of understanding about the fitness industry’s role in health prevention.

Reactions from Fitness Enthusiasts and Health Advocates

Public health advocates have also spoken out, warning that the tax could discourage people from engaging in physical activity. With non-communicable diseases on the rise in Indonesia, especially in urban areas like Jakarta, fitness and regular exercise are seen as critical components of preventive health care.

Several professional associations, including the Indonesian Sports Facilities Entrepreneurs Association (APFOI), have formally requested a revision of the tax structure. They argue that placing wellness facilities in the entertainment tax category sends the wrong message about the government's commitment to public health.

Broader Implications for Health and Wellness in Indonesia

Conflict Between Economic and Public Health Objectives

This controversy exposes the tension between fiscal policy and public health objectives. While local governments are under pressure to increase regional revenue, especially post-pandemic, they must balance this with policies that promote well-being and prevent disease.

Taxing sports facilities like entertainment venues may increase short-term revenue but could lead to higher long-term healthcare costs if fewer people engage in regular physical activity. This highlights the need for nuanced taxation that supports rather than penalizes public health behavior.

The Risk to Jakarta’s Health Infrastructure

Jakarta’s urban health infrastructure depends heavily on the private sector, particularly in the area of preventive wellness. Fitness centers, yoga studios, and martial arts dojos play a vital role in providing accessible spaces for physical activity. Taxing these venues more heavily could result in closures, reducing options for affordable fitness across the city.

It may also create socioeconomic disparities. Higher prices could make structured exercise less accessible to lower-income residents, deepening health inequalities.

Legal and Policy Considerations

There is ongoing debate about whether the regulation correctly interprets the national directive. Some legal experts suggest that the Jakarta government has some flexibility in defining what constitutes entertainment under local tax policy. This could open the door for a revision or refinement of the policy to better reflect the intent behind the law.

Public discourse has prompted Jakarta's Governor Heru Budi Hartono to issue a circular stating that fitness services aimed at improving health and education will not be taxed at entertainment rates. However, this directive has not been codified into formal revisions, leaving legal uncertainty.

Possible Solutions and Alternatives

Redefining Entertainment for Tax Purposes

A potential solution lies in creating clearer distinctions between different types of entertainment and fitness services. The city could revise its tax policy to introduce a separate category for health-related activities, with lower or zero tax rates for services that clearly contribute to public wellness.

This approach would align with practices in other countries, where health clubs and wellness programs are sometimes tax-exempt or subsidized. It would also demonstrate a more integrated policy framework that recognizes the link between physical activity and healthcare savings.

Public-Private Collaboration

The city could consider working with private fitness providers to co-develop wellness initiatives that support public health goals. In exchange for participating in such programs, businesses could receive tax relief or incentives. This collaborative approach could help both sides achieve their objectives: increasing public participation in exercise while also maintaining fair tax revenues.

Transparency and Communication

Finally, better communication and public engagement are critical. The Jakarta government needs to clarify who will be taxed, under what criteria, and how the policy will be enforced. Transparent policy-making helps reduce misinformation and fosters trust between authorities and stakeholders.

Engaging with fitness entrepreneurs, health professionals, and community leaders can lead to a more informed and balanced policy that serves the city’s long-term interests.

Conclusion: Finding Balance Between Revenue and Public Health

The sports tax controversy in Jakarta is more than a fiscal issue. It raises fundamental questions about how cities prioritize public health, economic resilience, and legal clarity. While the intent to expand the tax base is understandable, lumping health-oriented services with traditional entertainment undermines efforts to build a healthier urban population.

Jakarta has the opportunity to revise its approach, creating a policy that reflects modern understandings of fitness as an essential public good. A well-designed and fair tax policy could ensure sustainable revenue while supporting a vibrant and inclusive health and wellness ecosystem.