Taxes are the most important instrument for collecting government budgets. Since there are taxes, there is also a resistance to paying them. Through the work, the concept of tax evasion, its impact and the consequences on the economy in the Republic of Croatia were defined through certain types of taxes (income, profit and value added tax). Estimates are that Croatia loses 4,5 billion euros per year, which is lost due to tax evasion and fraud, corporate insolvency or the problems within tax administration. The evidence is due to the fact that taxes characterized by forced, irreparable and non – counterfeit counterparts, resulting in a negative attitude towards the fulfillment of obligations. The most significant volume of tax evasion is income tax for reporting to minimum income, while the remainder is paid in cash. On the other hand, the lower tax evasion level is in value added tax, which is probably a consequence of the supervisory mechanism. In order to reduce tax evasion, it is recommended to use institutional, legal and legislative measures, which include capacity building, relationship development, better and more competent education, stability and consistency of regulations. In all this includes a human factor, knowledge and tax morality that is very much needed in terms of reducing tax evasion.