The article estimates tax evasion in Croatia by looking at illegal economic activities that avoid paying taxes. Tax evasion reduces the tax base, leading to deficits that can be covered by higher taxes or borrowing. The study found that tax evasion in Croatia ranged from about 5.5% to 11% of GDP between 1994 and 2000. In unstable environments, people are more likely to evade taxes, but positive reforms can help reduce tax evasion over time.