In the Republic of Croatia a reform of the individual income tax became effective on July 1^st, 2010. The lowest marginal income tax rate was reduced from 15 % to 12 %, the highest marginal income tax rate was reduced from 45 % to 40 %. Since the tax brackets were also adjusted, some middle-income taxpayers are facing a higher tax burden. For high incomes, the reduction of the top marginal tax rate induces substantial tax savings. These tax reductions can help to save labour costs for employers of expatriates sent to Croatia. However, the maximum marginal tax rate including municipal surcharges and social security contributions is still more than 50 %. Thus, there is need for further tax reductions. From a fiscal perspective, these reductions are feasible, because the individual income tax accounts only for a small fraction of total tax revenues.