The comprehensive tax reforms introduced in 1984-85, streamlined Indonesia old colonial tax system. Although these tax reform improved upon the then existing system by a substantial degree in respect of revenue productivity and various Other measure of efficiency, but over time many problems have crept in. the tax system Since thyen many changes have been made in the tax structure through amandmentnsin laws and various government decrees issued from time to time. Mose of the changes were made for administrative convenience and also due to pressure form vested interests. Many of these changes have diluted the tax system. Presently, the Indonesia tas system is not able to generate sufficient tax revenues to meet the mounting government putlays and the government has to borrow heavily even to meet the recurring expenses. The country is burdened from massive debt-both domistic and foreign. The tax base is very narrow with only handful of eligble tax payers even registered as tax peyers with a small proportions of them actually filing tax returns. This is in spite of the fact that the tax rates in Indonesia are tgenerally lower than in other Asian countries. The actually filling tax revenue is much lower than the potential. Indonesia tax revenue as a percentage of gross domestic product is lower than other Asian countries with comparable or even lower per capita income. The income elasticity of tas system is very low and thus, it is an ineffective tool for stabilization and growth. It is thus important that the tax system should be subjected to comprehensive review and necessary changes made to achieve goals of tax policy rather than making piece meal changes in tax structure.