As investment activity is a major driver of development and new employment, the purpose of this paper is to investigate and analyze why significant investments are missing. The aim is to investigate whether the problem may be in the profit-making stage, on the assumption that the income tax rates are too high in the Republic of Croatia relative to the surrounding countries, or whether the capital income tax rates are too high or perhaps there are limiting factors due to legal provisions that do not allow the payment of profits or other non-fiscal factors are present, the specificities of the existing model of taxation of profits and the system of tax incentives, reliefs and exemptions will be explored, as well as their joint impact on tax competitiveness. Only through a systematic combination of various factors, tax rates (income tax and capital income tax), with the free transfer of profits, through various investment incentives, will the Republic of Croatia gain a competitive advantage over other countries in the region. That is, a positive investment climate will be created, which will attract domestic and foreign investments, and thus open up the possibility of using incentives in accordance with the Investment Promotion Act.