Indonesia Plucks a Golden Goose

In what appears to be a misguided attempt to stimulate Indonesia’s flagging domestic film industry, the government has told theatre owners it intends to introduce a new 23.75 percent excise tax on foreign films, effectively halting their distribution in the country.

Importers already have to pay a cumulative tax between 43.75 and 48.75 percent in excise duties, central government taxes and taxes on profit from ticket sales for local governments. However, critics are warning that the new tax, which would mean a cumulative total up to 70 percent in taxes and duties, would effectively kill the industry outright, both for domestic and foreign films. That, they say, would put 10,000 people directly employed in the industry out of work as well as thousands more who sell drinks and snacks, and would almost certainly provide a huge boost to sellers of pirated DVDs.

Noorca Masardi, a spokesman for the 21 Cineplex chain, told the Jakarta Globe that 21, Indonesia’s largest movie theater chain, with 500 screens, would only continue to screen foreign films that are already showing.

"[After this], we will not be able to screen any more imported films until the customs department changes its policy on film distribution in Indonesia," he said, adding that this applies not only to movies from the United States but also Europe and Asia.

The Motion Picture Association on Thursday told journalists at a preview for "Black Swan" that the Oscar-nominated movie was likely the last foreign offering it would bring into this country because of the new levy on imported film distribution.

Government officials involved in the matter have repeatedly declined to provide details of the new levy, saying only that talks were ongoing.

No other country has similar levies on foreign films although several use other methods to control distribution. China historically has sought to use the film and television industry to mould or protect the country’s culture. The government only allows about 20 foreign films into the country each year and in 2006 banned foreign cartoons from Chinese prime-time television.

As a result – a lesson the Indonesian authorities might learn -- film pirates do a roaring business, with some hit foreign films on China’s city streets even before they are in wide distribution in their countries of origin. As with Indonesia, France historically has fought hard to protect its domestic film industry as a cultural imperative, not always successfully.

"Every year, cinemas screen 50 to 80 local titles and 100 to 150 foreign titles," Masardi told reporters. "If the government does not revoke this new policy, it will kill the cinema industry in Indonesia," he said. "If no solution is found, Indonesian cinemas will close down one by one."

Indonesia’s film industry has suffered a downturn in recent years. In 2009, six local films sold more than a million tickets each at the box office. In 2010, only one movie broke the million mark. Last year, 81 Indonesian films had cinema releases, slightly down from 83 films in 2009, although a significant decline from 91 big-screen releases in 2008.

Members of the MPA include some of the biggest studios in the United States, including Walt Disney Pictures, Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox Film, Universal Pictures and Warner Bros. Entertainment.

With reporting from Jakarta Globe