Immediately after the House of Representatives of the Parliament of Bosnia and Herzegovina (BiH) adopted amendments to the law introducing a differentiated VAT rate, but also those temporarily suspending excise duties on fuel, the public got the impression that the effects of these legal solutions will be seen very soon.
Despite the fact that the entry into force of these legal changes requires their adoption in the House of Peoples, citizens expect that very soon, in a few days, products, primarily basic foodstuffs, will get cheaper. Experts, however, warn that the process, especially when it comes to the introduction of differentiated VAT rates, will take much longer and that there are no guarantees that the application of these amendments to the law will indeed lead to significant reductions.
Ratko Kovacevic, the head of the communications department of the Indirect Taxation Authority (ITA) of BiH, talked about the effects of these legal solutions in an interview.
The decision to abolish the single, ie the introduction of a differentiated VAT rate, Mr. Kovacevic, is awaiting confirmation in the House of Peoples, but citizens expect its effects very soon. What is necessary to do in order to correct prices in the interest of citizens and when can we realistically expect the implementation of these legal changes?
“To begin with, perhaps as information to all citizens in BiH – the Law on VAT in BiH has been in force since January 1st, 2006. It was prepared with experts from the tax administrations of the European Union (EU) member states in 2005 and it was then practically in full compliance with EU legislation defining VAT. But, we are now in 2022 and in the meantime, there have been no changes to the Law on VAT, so there are practically a number of elements that we would have to change, in fact, at the moment, in order for our new VAT Law to be harmonized with the legislation of the EU. On the other hand, when it comes to VAT rates, which envisages a new draft law passed in the House of the Parliament of BiH, it is left to all countries and members of the EU to decide for themselves whether to have a single rate or a differential rate. When it comes to BiH, since the very beginning of the implementation of the Law on VAT, we had a flat rate of 17 percent VAT and we have a zero rate for exports. Regarding ITA and the software solution that monitors the VAT system in BiH, everything is done and prepared in such a way that we implement this single rate, and if we want to go in the direction of introducing a differentiated VAT rate, then really more things have to happen there. First of all, the legal procedure for adopting amendments to the law in the field of indirect taxes stipulates that the approval of such an amendment must be given by the Board of Directors of the ITA, where three finance ministers in BiH have voting members. After that, it is envisaged that such a bill will go to the Council of Ministers and only then to the Parliament of BiH. So, it is the legal legislation that defines the amendment of any law in the field of indirect taxes, including the Law on VAT. What is necessary and the first step is the fact that, if we want to go in the direction of introducing differentiated rates, we must determine exactly which are the products of basic foodstuffs. “
In whose jurisdiction is it and how will these products be determined, on the basis of which parameters?
“The proposer himself should also say what the products are. In case it is not precisely defined, the assumption is that such a proposal will come to the Board of Directors to eventually form a working group, where someone from the working group may be a member of ITA and then, together with the proposer, go in the direction of a concrete and completely clear definition of what are the basic foodstuffs that will be taxed at a lower VAT rate. It cannot be said milk and dairy products will be taxed at a lower VAT rate, but it must be clearly and unambiguously listed – which are the products that will have a rate of 5% given that there are really a lot of dairy products and that many of these products do not deserve to be basic foodstuffs. Only when it is determined which products will be taxed at a lower tax rate and when it is determined in particular which products will be taxed at a rate of 22% according to that proposal, because they are considered a luxury, and whether the standard rate of 17% will remain for all other products, only then should such a proposal can go into some kind of final legal adoption procedure. ”
E.Dz.
Source: BHRT
