| 24 May 2024, Friday |

IMF warns Bosnian Serb separatists against dismantling tax regime

The International Monetary Fund (IMF) advised Bosnia’s autonomous Serb Republic on Wednesday against abolishing the state tax administration, warning that doing so would sever a crucial source of national revenue and harm the economy.

The region’s parliament is scheduled to meet on Friday to debate removing the Serb Republic out of Bosnia’s main institutions, including the Indirect Tax Authority, at the request of Bosnian Serb leader Milorad Dodik, who pushes for Bosnia’s “peaceful breakup” (ITA).

“We feel this course of action would have negative economic effects,” said Andrew Jewell, the IMF’s resident representative in Bosnia.

Under the U.S.-sponsored Dayton peace accords that ended the devastating 1992-1995 war, Bosnia was split into two autonomous regions – the Serb Republic and the Federation dominated by Croats and Muslim Bosniaks, linked by a weak central government.

In October, Dodik announced that the Serb Republic would withdraw from Bosnia’s armed forces, top judiciary body and tax administration, key pillars of state security, rule of law and the fiscal system.

Dodik, who currently serves as the Serb member of Bosnia’s tripartite inter-ethnic presidency, has long complained about state institutions, saying they were established based on decisions by international peace envoys and not enshrined in the constitution.

Jewell said that ITA represents one of Bosnia’s most successful institutions and that indirect taxes collected by the agency were the single most important source of revenue for the Balkan country’s multiple governments.

If the Serb Republic were to withdraw from this “proven framework for collecting and distributing indirect taxes”, Bosnia would likely return to an era when widespread tax evasion drove down revenue, Jewell said.

He said that dismantling the ITA would also jeopardize the servicing of Bosnia’s foreign debt, which ITA currently ensures via an automatic mechanism insulated from political interference, and likely weaken investor sentiment and raise borrowing costs.

The IMF made the statement as the Steering Board of the Peace Implementation Council (PIC), the body grouping representatives of the countries and international organizations overseeing Bosnia’s peace, is meeting to discuss what is widely regarded as the worst crisis since the war ended.

  • Reuters