This paper describes in detail the value added tax, more precisely the analysis, financial role and other effects. The aim of this paper is to provide a more in-depth explanation of the value added tax (VAT), which is one of the fundamental elements of the tax system. More specifically, the function, traits, and effects of VAT in the Republic of Croatia from 2015 to 2020 will be discussed. Value added tax, as a major component, can be described as a form of tax that levies the additional value that the seller adds to the price of the product or service he sells. In the framework of this work, we incorporate the fundamental concepts of public revenues and the tax system with the analysis of value added tax in the Republic of Croatia. To address residents' needs, the state accumulates financial resources in the form of taxes, which we refer to as public revenues. The tax system can be defined as a set of tax forms determined by the state based on factors such as territory size, economic development, and political structure. As a result, tax systems are critical for collecting public resources, which are then used to run the state and provide citizens with public goods and services. In this paper, we look at Croatia, whose tax system was established after the country's independence and is harmonized with European standards. The paper focuses on the analysis of value added tax in the Republic of Croatia in the period from 2015 to 2020. Laws and tax reforms will be presented, and with the help of them, the role, characteristics and impact of VAT on public finances will be explored. Changes in legislation are frequent, and it is emphasized that tax systems are subject to change. Also, it is important to note that the reforms had different effects on the business environment and state budget revenues.