This Occasional Paper is based on the research project “Analysis of the fiscal system of the Republic of Croatia at the introduction of value added tax” undertaken by the Institute of Public Finance and financed by the Ministry of Finance of the Republic of Croatia. Starting from the research project and the paper published in Croatian in the Institute’s journal “Financijska praksa”, Volume 20, Number 2 (August 1996) the revision of results was undertaken and presented in this Occasional Paper. The revision of original results was necessary because of changes in Croatian sales tax which were put in force after the Institute’s project has already been completed. The author of this paper is Martina Dalić (Ministry of Finance of the Republic of Croatia). The author thanks Danijel Nestić (Economics Institute, Zagreb), Saša Mađarević (Ministry of Finance of the Republic of Croatia), and Zdravka Barac and Zlatko Fabijančić (Tax Administration of the Republic of Croatia) for helpfully providing data and giving useful comments.