Volume 7 Number 2 Ed. December 2020 page: 240-259 p-ISSN: 2407-6635 e-ISSN : 2580-5570 240 Tax Holiday and Foreign Direct Investment In Indonesia EcceS: Economics Social and Development Studies Liza Herdiyati 1 , Setyo Tri Wahyudi 2 1,2 Department of Economics, Faculty of Economics and Business, University of Brawijaya 1,2 Jl. MT. Haryono 165 Malang, Indonesia E-mail : lizaherdiyati@student.ub.ac.id 1 , setyo.tw@ub.ac.id 2 (Article history) Received: 2020-10-30, Revised: 2020-12-11, Accepted: 2020-12-17, Available online: 2020-12-26, DOI: https://doi.org/10.24252/ecc.v7i2.16811 http://journal.uin-alauddin.ac.id/index.php/ecc/index Abstract: Tax Holiday and Foreign Direct Investment in Indonesia Foreign Direct Investment Inflows is important aspect of promoting economic growth and decreasing the unemployment rate. One of investment incentive applied in Indonesia is Tax Holiday. Meanwhile, research on tax holiday and their relation to foreign investment in Indonesia is still rare. This paper is aimed to measure the impact of Tax Holiday toward Foreign Direct Investment inflows in Indonesia. So, this study also compares the impact of tax holidays on 18 industries in Indonesia. The research found that the Tax Holiday incentive did not reach the expected target. Only 9 out of 18 business sectors affected by this policy, accounted for only 50% of its industrial target. The government ’s role is highly expected to evaluate the target of Tax Holiday, for example giving priority and adding incentives for industrial sectors that are clearly affected by the tax holiday policy. Keywords: Foreign Direct Investment; Investment Incentive; Tax Holiday. INTRODUCTION Foreign Direct Investment (FDI) has an essential role in the economy of a country. According to Kok dan Ersoy (2009), PMA has an effect on income, production, employment, economic growth, and general development and welfare in the host country. Apart from