Efficiency has long played a central role in the contested terrain of public administration values. The theoretical part of this doctoral thesis explains the role and importance of organizational theory at the micro and macro level. The new public management movement was only the latest demand that public organizations promote efficiency by adopting business methods. This paper analyzes the existing business processes and explores how to determine the optimal model of business processes in the Tax Administration. The goal of this model of bussines is to increase business efficiency and reflecting on all users of the Tax Administration. These facts indicate that there are many opportunities for the development of business process reengineering in government institutions, such as Ministry of finance of the Republic of Croatia. The Tax Administration is the administrative organization within the Ministry of Finance whose basic task is to implement tax regulations and regulations concerning the payment of obligatory contributions. Strategic approach is based on relationship with customers (tax payers). The aim of Tax Administration of Croatia (CTA) is to become tax payer service adjusted with their obligations. In any attempt to make improvements to processes, it must be possible to measure performance, otherwise there is no way of knowing whether, or proving that, there has been an improvement. During the research, a number of possible key performance indicators were identified. Key performance indicators are measures by which the performances of organizations, business units, and their divisions, departments and employees can be periodically assessed, compared and benchmarked. At the organization level, key performance indicators can be used for reviewing and will be useful for tracking, in the future, the effectiveness of any proposed changes to the business processes in the Croatian Tax Administration. Key performance indicators are defined as part of a hierarchical functioning and decision-making process. The main part of the doctoral thesis deals with explaining the benefits of the proposed changes which can help the Croatian Tax Administration to improve its effectiveness and efficiency and achieve its goals and strategy. The changes have been divided into two groups, firstly those which have been the result of the reengineering process, and secondly those which have been suggested based on international best practice and the tax experts experience. Not all the changes involve changes to the processes themselves. The changes proposed from the reengineering process have been divided into four different domains: Croatian Tax Administration organisational changes, legislative changes, workflow changes and general changes. viii Accordingly, in doctoral dissertation the suggested changes were presented within domains such as organizational changes, legislative changes, workflow changes and general changes. These changes would lead to increase efficiency of Tax Administration of Croatia and improvement of relations with tax payers.