Taxes emerged with one of the first steps taken by the civilization. They were and still are on of the main triggers of growth and economic development. Tax system reflects social image of society and describes its economic strength and investment competitiveness of the country. The elaboration of tax system is extreamly challenging, as each country has a unique and complexed mechanism of taxation. Therefore in this paper are given crucial facts necessary for its understanding. This paper consists of several parts. The introduction part of the paper gives a brief review of the topic. The second part clarifies the basic concepts relating to taxes and taxation system. Third part is a summary of tax system of the Republic of Croatia, where the key parameters of all its main tax forms are outlined through their development and reforms. The fourth section consists of system analysis in comparison with other countires and their tax structures, as well as a review of their impact on government budget revenue and the economy. Conclusion at the end of the paper gives a overview of the current state of the tax system, the challengens that tax policy faces, and the primary goals that it should strive to, that are necessary for creation of transparent system and maintenance of its efficiency. KEY