INDIRECT TAXATION AUTHORITY OF BOSNIA AND HERZEGOVINA

1. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority INDIRECT TAXATION AUTHORITY OF BOSNIA AND HERZEGOVINA Web address: www.uino.gov.ba

2. Bosna i HercegovinaBosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority 31 December 2003 FB&H – two administrations RS – two administrations BD – two administrations Beginning of 2004 The ITA BH was established with technical assistance of the CAFAO office and political support of the OHR

3. Bosna i HercegovinaBosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority • FINAL GOAL OF THE ITA B&H ESTABLISHMENT: • EFFECTIVE TAX ADMINISTRATION • Realized under three sub-gaols: • Establishment of the single Indirect Taxation Authority: • Merging of three local customs administrations • Collection and allocation of indirect taxes revenues at the state level (the Single Account) • Introduction of value added tax (merging parts of three local tax administrations)

4. Bosna i HercegovinaBosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority THE ORGANIZATIONAL STRUCTURE OF THE ITA B&H: The field activities are run by four regional centers in: Sarajevo, Banja Luka, Mostar and Tuzla, 30 customs sub-offices and 59 customs posts. Out of that 40 are passenger border crossings, 4 airports, 8 railway border crossing, 3 overseas mail offices and 4 free zones. The organizational structure of the ITA B&H consists of five sectors and four departments comprosing the Office of the Dirctor.

6. OPERATIOANAL LINES OF RESPONSIBILITY T – Tax C – Customs LE – Law Enforcement IT – Information Techonlogy BS – Business Services HQ – the headquarters R CBanja Luka R CTuzla T C LE IT BS T C LE IT BS HQ ITA T C LE IT BS R CMostar R CSarajevo T C LE IT BS T C LE IT BS

7. Bosna i HerzegovinaBosnia and HerzegovinaUpravazaindirektno-neizravnooporezivanjeIndirect Taxation Authority LEGAL FRAMEWORK OF THE REFORM ON THE INDIRECT TAXATION SYSTEM • Law on Indirect Taxation System of Bosnia and Herzegovina • Law on Indirect Taxation Procedure • Law on Payments on the Single Account and Revenue Allocation • Law on Value Added Tax • Law on Excise Duties • Law on Indirect Taxation Authority • Law on Forced Collection Procedure • Law on Customs Policy of Bosnia and Herzegovina • Law on Customs Tariff • Law on Customs Offences

8. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority

9. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority Befor the establishment of the ITA B&H, the customs and tax administrations, were gathered by 10.8 billion KM of indirect taxes revenues for four years, while the ITA B&H for four years of its work collected 17 billion KM.

10. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority Causes that have influenced the reduction in revenues in 2009 SAA – reduction of revenues for 2/3 Recession –reduction of revenues for 1/3 Decrease in imports by 25 % - reduced VAT base

11. Bosna i HercegovinaBosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority REVENUE PER EMPLOYEE REVENUE PER NUMBER OF EMPLOYEE EMPLOYEES • 2003 - 620, 000 KM 2244 • 2004 - 710, 000 KM 2244 • 2005 – 1, 089, 000 KM 1800 • 2006 – 1, 965, 238 KM 2100 • 2007 – 2, 120, 000 KM 2200 • 2008 – 2, 161, 403 KM 2280 Currently, there are 700 employees less than prescribed by the Book of Rule on Internal Systematization and actual needs of the ITA B&H. We have a small number of employees, which is significantly aggravating factor. Complete ITA B&H has less employees than the customs adminsitrations of Slvenia and Croatia.

12. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority RESULTS OF THE ITA B&H FOR THE FIRST FOUR YEARS OF WORK IN NUMBERS: • 3 MILLION OF PROCESSED CUSTOMS DECLARATIONS • 1.5 MILLION OF PROCESSED VAT REPORTS • 1,5 BILLION OF VAT REFUNDS TO TAXPAYERS • 25 MILLION KM OF SEIZED GOODS • 434 REPORTS SUBMITTED TO THE PROSECUTOR OFFICE OF B&H

13. Main economic indicators of Bosnia and Herzegovina

14. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority • REASONS FOR VAT • Goal:Together with other measures enable Bosnia and Herzegovina the macroeconomic stability, which will contribute to the stabilization of Bosnia and Herzegovina in other segments • VAT has led to: • Stimulation of exports • Discouragement of imports • Increase investments • Creation of fair market competition • Improvement of revenue collection • Reduction of the “gray” economy (2,000 of fictitious companies went out of business) • Establishment of the unique economic space (45,000 VAT payers under one roof)

15. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority • PROBLEMS THAT WE RECOGNIZED AND WHAT WE HAVE PROPOSED FOR THEIR SOLVING • ORGANIZATIONAL ISSUES: • In addition to existing four regions, introduction of two more regions (Doboj and Bugojno) • Introduction of nine tax branches (Trebinje, Livno, Zenica, Višegrad, Travnik, • Doboj, Bihać, Bijeljina, Brčko), in order to be closer to VAT payers • LOGISTICAL ISSUES: • Bad conditions of work (not salaries); we do not have own facilities • PERSONNEL ISSUES: • At 16,000 VAT payers (according to the entities data), it was planned to be 612 employees in the Tax Sector • Now we have only 450, and even 45,000 VAT payers. • We should have a minimum of another 700 employees in order to be able to control each taxpayer at least once in four years (Except for large taxpayers, who are bring under control every year) • We are completely powerless in the HRM. The Civil Service Agency employs officers, which is a very long process and does not guarantee the best staff. • Impossible to dismiss staff, even the following problems are recognized: 1) corruption; 2) bad work; 3) averse; 4) simulation of sick leave • TECHNICAL ISSUES: • Introduction of video surveillance • Introduction of fiscal cash registers • Introduction of measurment instruments for oil and petroleum products • Introduction of modern information system (current ASYCUDA is incompatible with the requirments of the EU)

16. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority PROPOSALS TO CHANGE THE LEGISLATION LAW ON EXCISE DUTIES: Increase of excise on cigarettes (the lowest excise in Europe) Payment of excise on coffee only during the importation Introduction of additional excise in the amount of 0.10 KM per liter of fuel for the construction of motorways Abolition of excise on alcohol, which is used as reproductive material in some industries LAW ON VAT: Shifting the deadline for payment of liabilities from the 10th to the 15th of the month Submission of the gross balance in electronic form at the end of each year CUSTOMS: Introduction of simplified customs procedures, which apply in the EU (licensed exporter, authorized importer, local-home clearance, etc)

17. Bosna i Hercegovina Bosnia and HerzegovinaUprava za indirektno-neizravno oporezivanje Indirect Taxation Authority Thank you for your attention!