The process of globalisation has led, among other things, to harmful tax competition. This paper considers the efforts within the EU in combating harmful tax competition (Code of Conduct on Business Taxation) and their effects when taking into account the EU regulations in relation to state aids. Considering a number of problems in the implementation of the Code, and the numerous criticisms with regard to the validity of the combat against harmful tax competition – it is difficult to give a final answer about its success. Croatian tax system, and the corporation tax in particular, are analysed in the light of the aforementioned problems. The advantages of the equal treatment of domestic and foreign investors, as well as the certain elements of state aids in tax benefits, are pointed out.