The decentralization process is a topical issue, not only in the Republic of Croatia, but also in all EU Member States. Following European Union standards, countries seek to improve their economic and political position so that the decentralization process itself can progress much faster. The term centralization refers to the kind of organization that focuses the management and management of a business or an entire business on top of a hierarchically determined organizational structure. Decentralization refers to the kind of organization by which management or management is transferred from the central authorities to the lower ones. By comparing centralization and decentralization and depending on the chosen regime of each country, the advantages, disadvantages and possibilities for its further development are determined. When talking about decentralization in the European Union, it is important to mention four basic models: German, Nordic, French and Anglo-Saxon models. The degree of decentralization of states can be measured by analyzing the fiscal aspects and non-fiscal (political and administrative) aspects of decentralization. One of the most important indicators of fiscal decentralization in the states is the share of own revenues of the federal and local governments in the total revenues of the general government. Local government revenue can come from a variety of sources. It is mainly about revenue through tax collection, various levies, fees, concessions, asset sales, etc. The Scandinavian countries (Denmark, Sweden and Finland) account for the largest share of their own revenue locally in total general government revenue. Another important indicator of fiscal decentralization of states is the share of expenditures of the federal and local governments in relation to total expenditures of the general government. This indicator shows the extent to which subnational levels of government have the autonomy to spend the money they receive, but also to what extent they can participate in the distribution of total resources at central government level. The EU28 average for own expenditure is 23.61% and is lower than the average for own revenues of 25.35%, which would conclude that most of the observed countries contribute to higher revenues at the local level in total revenues than general government expenditures. The share of revenues and expenditures of local units in Croatia ranges around the EU average, which shows that Croatia does not stand out in any two significant indicators of fiscal decentralization compared to other EU Member States. In Croatia, the share of own revenues is higher than the share of own expenditures, which is equal to the EU average. Municipalities and cities are local self-government units in Croatia. The units of regional self-government are counties. Financing of local units is determined by the Law on Financing of Local and Regional Self-Government Units, which regulates sources of funds and financing of activities from the self-governing scope of local and regional self-government units, distribution of income from income tax, fiscal equalization of local and regional units ( regional self-government and financing of decentralized functions. Fiscal equalization is an important way of financing local government and self-government units. There are two systems of fiscal equalization, namely, horizontal fiscal equalization and vertical fiscal equalization. Fiscal equalization is mainly done through the distribution of various common taxes between the central government and local units, but also with current central government grants to local government and self-government units that cannot finance their decentralized functions due to low revenue collected. The fiscal equalization system in Croatia is not efficient, and, moreover, research shows that in the past, the system has often caused even more inequality among local units in the country. The new Law on Financing Local and Regional Self-Government Units entered into force in 2018, and by increasing the funds for fiscal equalization in the distribution of income taxes (to 17 percent), an attempt was made to strengthen the equalization system, as well as to simplify the existing system of granting aid to units local and regional self-government from the state budget with clearly defined criteria that are transparent and predictable.