Immediately after the House of Representatives of the Parliament of Bosnia and Herzegovina (BiH) amendments to the law introducing a differentiated VAT rate, but also those temporarily suspending excise duties on fuels, public opinion had the impression that the effects of these legal solutions will be felt very soon.
Despite the fact that the entry into force of these legislative amendments requires their adoption in the House of Peoples, citizens expect that very soon, in a few days, products, mainly basic foodstuffswill cost less. Experts warn, however, that the process, especially with regard to the introduction of differentiated VAT rates, will take much longer and that there is no guarantee that the application of these amendments to the law will actually lead to significant reductions.
Ratko Kovavsevivs, the head of the communication department of the indirect tax administration (ITA) of BiHTalk about the effects of these legal solutions in an interview.
The decision to abolish the single rate, that is to say the introduction of a differentiated VAT rate, Mr. Kovacevic, is awaiting confirmation in the House of Peoples, but the citizens expect its effects very soon. What needs to be done to correct prices in the interest of citizens and when can we reasonably expect the implementation of these legal changes?
“To begin with, perhaps to inform all citizens of BiH – the law on VAT in BiH has been in effect since January 1st2006. It was prepared with experts from the tax administrations of the the European Union (EU) Member States in 2005 and was then virtually in full compliance with EU legislation defining VAT. Cornwe are now in 2022 and waiting, there have been no changes to the VAT law, so there are practically a number of things that we would like it must changeIn reality, right nowso that our new VAT law is harmonized with the legislation of the EU. On the other hand, with regard to VAT rates, which provides for a new bill voted in House of Parliament BiHit is left to all countries and members of the EU decide themselves whether to have a single rate or a differential rate. Regarding BiHsince the very beginning of the implementation of the VAT law, wheyD a flat rate of 17% VAT and we have a zero rate for exports. About the ITA and the software solution that monitors the VAT system in BiHeverything is done and prepared for us to implement this single rate, and if we want to go in the direction of introducing a differentiated VAT rate, then really more things need to happen there. First of all, the legal procedure for the adoption of amendments to the law in the field of indirect taxes provides that the approval of such an amendment must be given by the board of directors of the ITAwhere three finance ministers in BiH have voting members. After that, it is expected that such a bill will be submitted to the Council of Ministers and only then to the Parliament of BiH. Thus, it is the legal legislation that defines the modification of any law in the field of indirect taxes, including the VAT law. What is needed and the first step is the fact that, if we want to go in the direction of introducing differentiated tariffs, we have to determine exactly which products are basic foodstuffs. “
What jurisdiction is it in and how will these products be determined, based on what parameters?
“The proposer himself must also say what the products are. In the event that it is not precisely defined, the assumption is that such a proposal will come to the Board of Directors to possibly form a working group, where someone from the working group can be a member of ITA then, with the author of the proposal, to move in the direction of a concrete and completely clear definition of what are the basic foodstuffs which will be taxed at a lower rate of VAT. We can not say milk and dairy products wwill be taxed at a lower rate of VATbut it should be clearly and unambiguously listed – which products will have a 5% rate given that there are really a lot of dairy products and many of these products do not deserve to be staple foods. It is only when it is determined which products will be taxed at a lower rate and when it is determined in particular which products will be taxed at a rate of 22% under this proposal, because they are considered a luxury, and if the standard rate of 17% will remain for all other products, then only such a proposal should can enter into a sort of definitive legal adoption procedure. ”