What is the 'Tax and Service Charge' in Indonesia?

You have probably noticed that the prices in Indonesia in restaurant and bars are often accompanied of a "++" sign. For instance: "Sunday Brunch Rp350,000++".

What the tax and service means

The plus plus sign means that you will have to pay an additional charge for tax and service.

The tax is a regional tax called PB1 or PHR (Hotel and Restaurant Tax) of 10%. It is collected by a Kabupaten (Regency) or a City, like Jakarta DKI. Technically, it is not a Value Added Tax (VAT) but it looks like it from a client's perspective.

A regency like Badung in Bali, where Nusa Dua, Jimbaran, Kuta, Legian, Seminyak, Canggu and Uluwatu are located is extremely wealthy. In this area, they have 2000 hotels currently listed on Agoda and even more restaurants. Each of them give 10% of their revenue to the regency. A quick calculation: 30,000 room nights at 70$ on average X 70% occupancy X 365 days X 10% = 53,655,000 USD per year for the hotel tax only for this small regency.

It makes me wonder why there is not enough money for education, healthcare, proper roads, cleanliness, water and garbage system, infrastructure, etc...

The service charge is collected by the hotel or the restaurant. It is actually a tip that will be distributed among the staff at the end of the month. There are no rules as to how it must be done. Some company will share it evenly between everybody, from office to kitchen staff. Some don't and choose to give it to a limited number of persons.

5-star hotels in Jakarta may distribute up to 4,000,000rp per month per employee. Even better, the service charge of the Saint Regis Hotel in Bali is rumored to be as high as 7,000,000rp per employee on the best months. What is for sure is that in many popular hotels and restaurants, most of the paycheck comes from the service charge

The amount of Service Charge varies from 5% for a restaurant to 10% for a hotel. A restaurant or spa located inside a hotel will have to pay 10% as well. Some independent restaurants may choose to collect more than 5% of service charge to make the staff more motivated. It is also a way for an owner to increase the salaries without using his own money.

I know that there is a lot of fraud in the industry regarding the tax and the service. Many smaller hotels and restaurants will collect it and keep it for themselves. Or they will not give all of it back. Some small restaurants are not even subject to the 10% tax but they still put it on their menu to increase their revenue.

Last point: The service charge itself is taxable. This explains why you may have up to 21% Tax and Service Charge.

For instance, you buy an orange juice 10,000rp with 10% Service Charge and 10% Tax. You will pay:

10,000rp X 10%=1000rp of service charge

The taxable amount is 10,000rp (orange juice) + 1000rp (service charge) = 11,000rp.

The amount of tax to pay is 11,000rp X 10% = 1,100rp which is 11% of 10,000rp.

In total, you really pay 10% Service Charge and 11% Tax.