Bosnia-Herzegovina Country Profile

Tax Administration

Individual Corruption

The tax administration in Bosnia-Herzegovina has undergone significant reforms in recent years with the aim of increasing tax revenue and rooting out corruption. According to a 2004 survey by Transparency International Bosnia-Herzegovina, this initially resulted in major improvements of the public perception of the tax sector as well as a reduction in the citizens' actual experiences of bribery to tax officials. However, according to the Transparency International Global Corruption Barometer 2007, citizens perceive corruption amongst tax authorities to be have increased.

Business Corruption

Data from the EBRD & World Bank BEEPS 2005 reveals that a significant proportion of companies still report that bribery is frequent in relation to tax collection, despite reforms that have brought about a uniform VAT and corporate tax. This is confirmed by a World Bank & IFC Enterprise Surveys 2005, in which the majority of companies in Bosnia-Herzegovina report that they expect to give gifts in meetings with tax inspectors.

Political Corruption

Reform of the tax administration is ongoing, and there are indications that initiatives have reduced corruption among tax officials. However, studies agree that corruption still thrives due to the complex institutional setup in the tax administration, which, among other entities, consists of 10 cantonal and 129 municipal tax offices. Some of these offices operating at a local level have close ties with local citizens and companies, thus raising the potential for corruption or preferential treatment.

Frequency

The World Bank & IFC: Doing Business 2009:
- A company must make an average of 51 payments each year to tax authorities, taking an average of 428 hours at a total tax rate of 44% of profit.

Transparency International: Global Corruption Barometer 2007:
- Households give the tax revenue authorities a score of 4 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

EBRD & World Bank: BEEPS 2005:
- 14% of companies report that bribery is frequent for tax collection purposes.

The World Bank & IFC: Enterprise Surveys 2005:
- 70% of companies expect to give gifts in meetings with tax inspectors.