Indonesia, as the world‟s largest archipelago, has profoundly influenced the country‟s diverse culture, social, political and the economy due to its strategic location. “Unity in Diversity” as a national motto for the Indonesian denotes to one of the greatest attractions of Indonesia. The developed, peaceful and socially just environment has shaped the country into one of the main destinations for investment especially foreign direct investment. Looking at this opportunity, the Indonesian government provides high priority to the country‟s economic development by introducing tax holiday. Government policies aim at ensuring the perfect collaboration between foreigners and Indonesians to assist in the development of country‟s economy. The purpose of this research is to analyze whether the implementation of tax holiday will influence the level of foreign direct investment in Indonesia and the amount of tax revenue collected. The results showed that tax holiday will have a positive impact on investment and no negative effect in the tax revenue in the long run.