O Hollywood movies, where art thou?

By Esther Samboh

An array of summer blockbusters like Harry Potter and The Deathly Hallows Part 2 is just around the corner, but it seems like you would have to buy pirated DVDs instead of cinema tickets to see them.

At times like this, when middle class grows significantly and young population dominates Southeast Asia’s largest economy, the absence of Hollywood movies at local cinemas seems to make a big case.

Such critical demographics they are, everyone seems to have been playing the “blame game” in this case. Sobering fact: Most of them pointed it to the wrong direction.

“It’s the government’s fault for raising film taxes so Hollywood movie association backed off,” many would have been thinking as they see a parade of lower-quality flicks at local theaters since early this year. Sadly, those thoughts are only partially true.

First of all, there’s no increase in taxes (and besides, they’re not taxes, they’re import duties). Secondly, the Motion Pictures Association (MPA), which shelters Hollywood movie producers such as the 20th Century Fox, Walt Disney, Time Warner and Sony Pictures, has never announced such kind of withdrawal.

An official press statement released by the president and managing director of MPA Asia Pacific Mike Ellis shows that the group stressed that no joint commercial decisions had been discussed or undertaken among studio members and that the MPA was not involved or responsible for the distribution of its member companies films.

Now, could you still blame the government? Probably, but just partially. It’s more for the reasons of regulatory uncertainties rather than for tangible taxation matters.

Now this reasoning will take five minutes of your time to read, but it should be worth it.

In 2006, the government changed its 1995 customs regulation on the values of duties which is adopted from the World Trade Organization (WTO)’s Valuation Agreement, which has been ratified in 1994.

The 2006 customs regulation stipulates that imported films are given (under the HS Code 3706) import duties of 10 percent, import value added tax of 10 percent and import income tax of 2.5 percent.

In addition to that, because of film particularity that correlates with intellectual property rights, importers must also pay royalty fees which are estimated to be at the same amount as the existing 22.5 percent total taxation obligations.

Although the regulation has been in place since 1995, the government reassessed the regulation in 2010 and found billions of rupiah of royalty fees in arrears as importers were unaware of such kind of taxation.

That’s one loophole from the government’s front, but officials could justify it with the self-assessment system that our taxation system adapts, which means you pay taxes based on your own assessment.

Three importers, all of which are affiliated with the Cineplex 21 Group, are currently settling their cases at the tax court as they are reluctant to pay the penalties—which is understandable given that they were unaware of the royalty fees for years and, after all, business is business. Which profit-oriented business would want to pay such high costs for something they thought did not exist?

Only until they’re done with the settlement at the tax court and start importing again, we could continue watching Hollywood movies screened at local cinemas again, as they are major importers, if not the only, for Hollywood movies.

So is Cineplex 21 the one to blame? Not fully. But, yes, on certain levels. Why? Let me take you on a tour of those movie rolls from Hollywood to Jakarta.

Foreign movie exporters, in this case MPA member studios, ship their film rolls to Indonesia to be received by local importers and distributed across the archipelago. So if the MPA members agree to find other local partner for importers and distributors of their film rolls, it would solve the problem.

So it all came down to three options for Hollywood movies to return to local theaters: regulatory certainty, Cineplex 21 Group tax court settlement, and MPA’s openness for new importers which are not implicated with taxation cases.

But since the government introduced Friday a new taxing system for imported films that will make import duties payment more simple, the regulatory front has been cleared.

I wrote the 140-character version of those reasoning on my Twitter account recently, and one of my followers replied, “Hollywood, please ditch Cineplex. Find other importers.”

If that happens, then all’s well that may end well. We’ll start seeing our Hollywood idols back at local cinemas with surround sound and giant screen, instead of through 30 inch television relying on that tiny DVD player.

Otherwise, que sera, sera, whatever will be, will be.

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