IMF Representative Jewell: Dissolving the ITA would jeopardize external Debt Service in BiH

International Monetary Fund (IMF) Resident Representative in Bosnia and Herzegovina (BiH), Andrew Jewell said yesterday in Sarajevo that dissolving the Indirect Taxation Authority (ITA) would jeopardize the timely servicing of foreign debt of BiH, which the ITA is currently providing through an automatic mechanism isolated from political interference.

According to him, even if the entities remain committed to servicing their obligations, the transition from this proven mechanism would probably weaken investor sentiment and increase debt costs.

Jewell emphasized that the ITA, just like the Central Bank, is a pillar of the economy that serves the citizens of BiH well.

He reminded that the Government of the Republika Srpska (RS) announced its intention to withdraw from the ITA.

“Leaving aside the legal issues that the IMF is not in a position to comment on, we think that such a move would have major economic consequences since the ITA is one of the most successful institutions in BiH,” Jewell stated.

Also, he added that indirect taxes collected by the ITA are the most important source of income for the governments of the Federation of BiH (FBiH), RS, and Brcko District of BiH, which are used to finance schools, hospitals, construction of roads and highways, and pension payment.

Except in 2020, when we were hit by a pandemic, these revenues have been growing steadily in past years. With the recovery of the economy, we expect that this year revenues from indirect/indirect taxes will reach the highest level so far, ” Jewell pointed out.

He explained that this proven framework for collecting and distributing indirect taxes would fall apart if RS withdrew from the ITA, and BiH would then likely return to the situation before the ITA was established when tax competition between the entities and widespread tax evasion reduced incomes across the country.

He also believes that lower revenues, in that case, would jeopardize key services which are currently provided by governments.

“For all these reasons, we urge the authorities to preserve the integrity of the ITA,” Jewell noted, as it was announced by the IMF’s Office in BiH.

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