A problem of all modern countries is the constant struggle and effort to raise the level of consciousness regarding the need to pay taxes. Through constant and ensured taxation, the budget can be evenly filled, which then enables the entire state to function normally, through financing of public expenditures.
All countries register a certain rate of grey economy, which poses a significant problem for the economy's development, and also for the functioning of the state. Croatia's economy is no exception to this. The level of tax morality, i.e. the level of financial discipline, is not at a satisfactory level today in the Republic of Croatia. This is corroborated in the data gathered by the European Values Survey (2008), conducted in 47 European countries. The object of its research was to test tax-paying culture and to measure factors that influence the level of tax evasion (trust in institutions, distribution of honesty, life quality, etc.). Research results have shown that the Republic of Croatia, together with other countries from the region, is very low-ranked among regular tax-payers, which again indicates a high level of tax evasion. Furthermore, research indicates that the factors which lead to tax evasion are the taxpayers' views on the fairness and complexity of tax regulations, about the state and the services it offers, the level of punishment for tax evaders, but perhaps the most important one was the ease of tax evasion.
Parts of the analysis in question can be applied to available data on the incomes of entrepreneurs doing business in the Republic of Croatia. According to the analysis of their stated incomes, i.e. profits in their businesses, it is apparent that most of their business transactions are done over bank accounts. A detailed analysis of a certain number of taxpayers from different areas has shown that the rate of cash transactions in those taxpayers is not higher than 15 per cent of their total revenue. Also interesting is the data on businesses which have no cash transactions at all. Cash transactions are registered mostly in the following businesses: hospitality and related services, retail and some of the service industry businesses. According to statistical reports on yearly income tax statements for trade crafts and free enterprises, businesses which mostly make their revenue in cash, there is a very low rate of business being done.
Thus, for example, from yearly income tax statements from natural persons who are in the hospitality business (restaurants, bars, etc.), on the basis of statements for 2010, the average daily turnover (365 days) is around 620.00 kunas, which implies that the average daily income is 100.00 kunas. Along with this data, it should be noted that these same taxpayers employ 1.5 employees in the same period.
From yearly income statements of natural persons who are in the retail business, on the basis of statements for 2010, the average daily turnover (365 days) equals 734.00 kunas, and the average daily profit is equal to 85.00 kunas. Along with this data, we note again that these taxpayers employ 0.7 employees in the same period.
After having analyzed all available data and all research, it is justified to question the objectivity of all reported cash transactions. Tax oversight of cash transaction registration has also confirmed this. Such tax oversight is very difficult to do, as it comes down to constant logging of product stock and services and comparing it to actual revenue. Oversight procedures spend enormous amounts of energy in order to efficiently and timely detect violators and remove them from the market using tax sanctions in order to create space for those who regularly settle their tax obligations.