Bosnia And Herzegovinia To Shift Tax Burden

by Ulrika Lomas, Tax-News.com, Brussels

30 October 2015

The International Monetary Fund has said Bosnia and Herzegovina has improved tax administration markedly, but corporate and personal income tax receipts remain stubbornly low due to narrow tax bases, generous incentives, and low compliance rates.

In its 2015 Article IV consultation report for the country, the IMF noted that indirect tax revenues collections have improved markedly, with indirect taxes and social security contributions together providing more than 90 percent of revenues.

The Fund said that the standard tax rates of both income taxes and value-added tax (VAT) are low and competitive in the region. It expressed support for the single VAT rate of 17 percent and its broad base, which ensure a high efficiency of VAT collection. However, to improve direct tax collections, the IMF said the nation should strengthen the powers of the tax administrations and move toward a risk-based approach for selecting taxpayers for tax audits and inspections. The Government should also increase efforts to collect outstanding tax and social security contribution debts, it said.

The report also said that the high labor tax burden is a strong disincentive for people to move from informal to formal employment and, possibly, for some, to even enter the labor market.

The report noted that the Government is planning to lower the tax burden on labor and adopt new income tax laws.

TAGS: compliance | tax | value added tax (VAT) | tax compliance | Bosnia and Herzegovina | revenue guidance | law | International Monetary Fund (IMF) | corporation tax | audit | tax rates | social security | tax reform | individual income tax

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