Every modern state, mostly, generates it’s revenue by collecting taxes. Taxes are the means by which the state finances public needs and without them the survival and functioning of the state would be unthinkable. The basic characteristics of the taxes are forcibility, irreversibility and the absence of direct remuneration, which ultimately results in a negative relationship between taxpayers in fulfilling the obligation of paying taxes, or the taxpayers desire to reduce or completely avoid tax. Avoiding tax payments may be in accordance with the law, then we are talking about a lawful tax evasion, however, when there is a violation of the law in order to avoid the obligation to pay taxes, we are talking about an illegal tax evasion. The causes of tax evasion are divided into three groups according to their common characteristics: institutional, legal and socio-economic causes. In the same way are classified measures to prevent tax evasion. Tax evasion in the Republic of Croatia is a big problem. Tax authorities are trying various measures to reduce and prevent tax evasion and raise awareness of taxpayers about the importance of paying taxes, but in spite of these measures, Croatia needs to pay attention to the system of punishing tax evasion.