Poverty is an age-old issue but one that remains an unsolved problem for every ruling government in Indonesia due to the dynamism of poverty. This dissertation addresses the four main challenges and opportunities of fiscal policies for supporting poverty alleviation in Indonesia: 1) the role of import tariff policies on protecting the poor from the volatility of world commodity prices; 2) reallocation fuel subsidies and its implication on fiscal balance and poverty; 3) the poverty impact of the 2008 corporate income tax reform; 4) poverty dynamics and the role of government assistance in changing poverty status. Fiscal policies theoretically can influence poverty (the expenditure based poverty measurement) depending on: 1) change in expenditure as a result of a change in price; 2) change in expenditure as a response to utility change due to a change in price; 3) change in expenditure as a response to utility change due to a change in income; 4) change in poverty line as a response to a price change; 5) change in income distribution as a response to a change in endowment. This study applies the CGE-MS approach and the endogenous poverty line to measure the poverty impact of fiscal policy reforms. Further, the GGE model is based on the extension of the 2005 Social Accounting Matrix while the microsimulation is based on the 2005 National Socio-Economic Survey (SUSENAS) covering 64,407 households. The study found several findings: first, the volatility of world rice and soybean prices during 2007 to 2010 had a great effect on the poverty incidence in Indonesia. A 60 per cent increase in world rice price raises the headcount index by 0.81 per cent while the zero import tariffs on rice reduced the headcount index by 0.19 per cent. In the case of soybean, a 40 per cent increase in the world price raises the headcount index by 0.204 per cent while the zero import tariffs could only decrease the poverty by 0.059. Government, therefore, should complement the zero import tariffs with other policies to provide maximum protection to the poor. Second, between 2000 and 2011, Indonesia burnt 61 per cent of oil and gas revenues to fuel and electricity subsidies. If government is able to cut fuel subsidies by 86 per cent, there is no budget deficit in 2011. The 100 per cent removal of fuel subsidies and the reallocation of 50 per cent of them to government spending, transfers and other subsidies could decrease the incidence of poverty by 0.277 per cent. However, these reallocation policies might not be effective to compensate the adverse impacts of the 100 per cent removal of fuel subsidies if there is a mark-up pricing over the increase of production costs. Third, the 2008 CIT reform supported by administrative reforms and the tax amnesty has increased new corporate tax payers by 422,407 and tax revenue by 53.95 per cent during 2009 to 2011. Further, a cutting the CIT rate from 30 per cent to 25 per cent will attract IDR 41.77 trillion of new investments, create 441,910 new job opportunities and lift 1.88 million people (0.898 per cent) out of poverty. Fourth, observing the SUSENAS panel data set of 2005 and 2007, around 28 per cent of poor households are classified as chronic poor. This study using the ordered logit model found that the important factors of poverty dynamics in Indonesia are the size of household member, physical assets (land and house ownership), economic shocks, employment status, access to electricity, changes in the size of household member and in the microcredit program. Unfortunately, there is no consistent statistical evidence of government assistance in protecting the poor due to an unequal distribution. Fifth, corruption reduces the effectiveness of fiscal policy on reducing poverty due to rent seeking behavior. Great efforts to eradicate corruption would likely have an immediate effect of increasing public investment that would benefit to the poor.