2015年-IMF国际货币组织全球_Bosnia_and_Herzegovina_Selected_Issues_32页_1mb

Summary of Selected Issues Paper on Bosnia and Herzegovina (October 2015)

Core Content

This document presents an analysis of government spending and the tax system in Bosnia and Herzegovina (BiH), highlighting key challenges and policy recommendations aimed at improving fiscal sustainability, efficiency, and growth potential.

Main Points on Government Spending

A. Level of Government Spending

• BiH has one of the largest public sectors in the region, with public spending accounting for over 41 percent of GDP, second only to Croatia.
• Current expenditures are high, with a significant share going to wages and social transfers, which has hindered fiscal consolidation.
• The general government deficit peaked at 6 percent of GDP in 2009, was reduced to 2 percent by 2013, and increased again to 3 percent in 2014 due to a natural disaster.
• Public investment has been declining, with the share of capital spending dropping from around 8 percent of GDP in the pre-crisis period to less than 7 percent thereafter.
• Fiscal decentralization and the existence of multiple institutions have contributed to inefficiencies and high public spending levels.

B. Structure and Efficiency of Government Spending

• Public sector wages are disproportionately high compared to the private sector, creating distortions and disincentives for private sector development.
• Social benefits in BiH are poorly targeted, with the poorest 20 percent of the population receiving only 36.8 percent of total social assistance spending, compared to over 60 percent in regional peers.
• Health care spending is the highest in the region at over 7 percent of GDP, but health indicators are below average, indicating inefficiencies.
• Education spending is also fragmented, with 14 ministries of education and a large share of the budget going to wages rather than infrastructure or system development.
• Active labor market programs are underfunded, limiting their ability to address unemployment and skills mismatches.

C. Policy Recommendations

• Reduce the size and inefficiency of the public sector by rationalizing the institutional framework and improving the targeting of social benefits.
• Refocus spending toward human and physical capital to boost productivity and growth.
• Consolidate social spending and improve efficiency in the health and pension sectors to create fiscal space.
• Strengthen tax compliance and implement broad-based tax reforms to improve the tax system's efficiency and fairness.

Main Points on Tax System

A. Introduction

• BiH has one of the highest tax revenue-to-GDP ratios in the South Eastern Europe (SEE) region, at 38 percent of GDP.
• A high tax burden on labor and a low share of direct taxes contribute to informality and discourage formal employment.
• The tax system needs to be more efficient and equitable, with a focus on broad-based taxation and stronger compliance mechanisms.

B. Level and Structure of Tax Revenues

• Social security contributions (SSC) account for over 40 percent of total tax and SSC revenues, compared to a regional average of 31 percent and EU average of 30.5 percent.
• Direct taxes (especially individual income tax) are low, contributing only 8 percent of total revenues, while indirect taxes make up about 50 percent.
• VAT is a major source of indirect tax revenue, with a rate of 11.8 percent of GDP in 2014.
• Excise taxes and trade taxes have been increasing in recent years, but remain relatively low compared to other countries.

C. Tax Efficiency and Policy Recommendations

• Tax efficiency is low in BiH, with a high total tax wedge and significant inefficiencies in tax collection.
• The tax system should be reformed to reduce the burden on labor, increase the share of direct taxes, and improve the targeting of social assistance.
• General recommendations for revenue mobilization include:
  • Establishing institutions that limit rent-seeking and promote compliance.
  • Enacting clear laws and regulations with strong taxpayer protection.
  • Eliminating unnecessary exemptions.
  • Implementing a broad-based VAT with a high threshold.
  • Creating a competitive corporate income tax system.
  • Expanding the personal income tax base and ensuring coherent treatment of alternative capital income.
  • Levying excises on key items.
  • Developing simple but coherent tax regimes for small businesses.
  • Strengthening real estate taxes.
  • Enhancing capacity for tax expenditure and policy analysis.

Key Information

• Fiscal consolidation in BiH has been largely driven by the central government, but local governments and social funds continue to generate deficits.
• Public investment is critical for long-term growth, but it has been decreasing, with increasing reliance on foreign financing.
• Social assistance is poorly targeted and consumes a large share of public resources, particularly from social security contributions.
• Labor market issues, including high unemployment and informality, are exacerbated by the high and inefficient tax burden on labor.
• Fragmentation in health and education systems leads to inefficiencies and poor outcomes despite high spending.
• Tax reform is essential to reduce the tax wedge, improve efficiency, and create fiscal space for social programs and infrastructure.

Conclusion

Bosnia and Herzegovina faces significant challenges in fiscal sustainability, public sector efficiency, and tax system reform. A more balanced and efficient tax system, combined with structural reforms in social spending and public investment, is crucial for improving economic growth, reducing informality, and enhancing labor market outcomes.