News in English     | 04.03.2018. 23:11 |

Parody: VAT increase not in focus, impressive results of FBiH Tax Administration

FENA Press release

SARAJEVO, March 4 (FENA) - Increase in value added tax in Bosnia and Herzegovina is not the focus, but income tax reduction is which is the largest in the region, said Francisco Parodi, Resident Representative of the International Monetary Fund (IMF) in BiH.

He spoke in an interview for the Independent Research Center (NICK) after the IMF adopted important decisions regarding continued support to BiH authorities in an extended fund facility, and accepted a review of the economic situation and reforms in BiH.

Speaking about the potential for economic growth, especially after the adoption of the excise tax laws which opened up space for major infrastructure works, Parodi stressed that in comparison with the estimated growth of 2.7 percent in 2017, in 2018, expected gross domestic product growth is 3.2 percent.

“Keep in mind that the Corridor 5-C construction for the next nine years, totaling around 12 percent of 2017 GDP, is the country's largest infrastructure project in the last decades. This project will help to open new jobs in the construction sector, while at the same time increasing production capacities and economic potential in the long term,” he said.

Asked whether he supports the amendments to the VAT law and the VAT increase, Parodi emphasized that they did not discuss it with the BiH authorities, saying that the focus in the coming period will be on reducing labor taxation which is among the largest in the region.

“High labor taxes "kill jobs" because they increase the cost of hiring workers. They also stimulate employers to be "paid under the table" and avoidance of taxation. The so-called "gray economy" contributes to income inequality and further suppresses growth,” explained Parodi.  

He also commented on the work of the Tax Administration of the Federation of Bosnia and Herzegovina in recent years, calling it impressive and reporting that in 2017 the collection of direct taxes grew by more than 13 percent, which is much more than the economic growth and shows that the Tax Administration is doing its job.

Speaking of the EFF, Parodi says the implementation of this program is going on quite well, in spite of the delays in reforms.

Most of the fiscal goals from the program have been met, he added, the budgets have been adopted in the state and entity parliaments in line with the IMF recommendations, and the authorities have harmonized the entity level profit tax laws, which will simplify corporate taxation and reduce space for tax evasion.

"Of course, high risk because of political situation in BiH continues to be an obstacle to the country's ability to attract foreign investments, and the policy effects in terms of improving business climate can be burdened if political risks remains high or they increase in fact," concluded Parody in an interview for NICK.

(FENA) S. R.

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