Since 2011, the Indonesian government has launched a new regulation on the transfer of property tax collection authority for land and property acquisition (BPHTB ) and urban and rural property tax (PBB-P2) from the Central Government to the Local Government. This policy is the embodiment of the decentralization era that began in 1999. After a long discussion lasting 10 years, the central government is now ready to give authority to the local government to collect and manage property taxes as its own sources of revenue . To this end, the transfer of two components of property taxes which are BPHTB and PBB-P2 as local government authority is regulated by Law No. 28/2009 on taxes and duties of local authorities. However, this process will not go as smoothly as expected. Both central and local governments will face challenges that can suppress the transfer of authority. This paper aims to analyze the impact of the transfer of fiscal authority, the challenges that local government should address, as well as the action that local government should take as a solution to the challenges. Background: Property Taxes in Indonesia Property taxes in Indonesia are known as Pajak Bumi dan Bangunan-PBB (Land and Building Tax). It is levied on the capital value of land and buildings. The tax obligation is defined broadly so that it falls on the owner and/or beneficiary of the land and/or building. Property taxes in Indonesia are regulated by Law No. 12/1994. According to the object of taxes, land and building tax consists of:1. Land and Buildings Tax (PBB)1. Urban and Villages (PBB-P2)2. Forestry3. Mining4. Agriculture2. Property Tax Collection for Land and Property Acquisition (BPHTB) Previously, property tax collection was deconcentrated… middle of paper… InterScienceMikesell, J. 2011. Tax Administration. Boston, Massachusetts: Wadsworth/Cencage Learning Republic of Indonesia, 2009. Law Number 28/2009 on Local Government Taxes and Fees Republic of Indonesia, 1994. Law Number 12/2004 on Property Taxes Republic of Indonesia, 2013. Financial Note and Indonesia Fiscal Year 2013 Budget. Online Reference: Pendaerahan PBB http://www.bppk.depkeu.go.id/webpajak/index.php/artikel/ok-pbb/1082-pendaerahan-pbb (accessed 13 November 2013 ) Meninjau Kembali Pemekaran Wilayah (Daerah Otonom Baru) http://otda.bappenas.go.id/index.php?option=com_content&view=article&id=124%3Apemekaran-wilayah-dob&catid=1%3Alatest-news&lang=in (visited on November 10, 2013) ) Why civil servant neutrality is a must http://www.thejakartapost.com/news/2001/01/12/why-civil-servants039-neutrality-a-must.html (accessed November 10 2013)