IMF warns Bosnian Serb separatists against dismantling tax system

The logo of the International Monetary Fund (IMF) is seen outside the headquarters building in Washington, United States, September 4, 2018. REUTERS / Yuri Gripas / File Photo

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SARAJEVO, Dec. 8 (Reuters) – The International Monetary Fund (IMF) on Wednesday warned the Autonomous Serbian Republic of Bosnia against dismantling the state’s tax administration, saying such a move would cut off a key source of national income and harm the economy.

At the behest of Bosnian Serb leader Milorad Dodik, who advocates a “peaceful dissolution” of Bosnia, the region’s parliament is due to discuss Friday the withdrawal of the Serbian Republic from key Bosnian institutions, including the Indirect Tax Authority (ITA).

“We believe this course of action would have damaging economic consequences,” Andrew Jewell, the IMF’s resident representative in Bosnia, said in a statement.

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Under the United States-sponsored Dayton Peace Accords that ended the devastating 1992-1995 war, Bosnia was divided into two self-governing regions – the Serbian Republic and the Croat-dominated Federation and the Muslim Bosnians, bound by a weak central government.

In October, Dodik announced that the Serbian Republic would withdraw from the armed forces of Bosnia, the higher judiciary and the tax administration, key pillars of state security, the rule of law and the system. tax. Read more

Dodik, who is currently a Serbian member of the Bosnian interethnic tripartite presidency, has long complained about state institutions, saying they were established on the basis of decisions of international peace envoys and not enshrined in the constitution.

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

If the Serbian Republic pulled out of this “proven framework for collecting and distributing indirect taxes,” Bosnia would likely return to a time when widespread tax evasion reduced revenue, Jewell said.

He said dismantling the ITA would also jeopardize Bosnia’s external debt service, which the ITA currently provides through an automatic mechanism shielded from political interference, and would likely weaken investor sentiment and increase borrowing costs.

The IMF made the statement as the Steering Committee of the Peace Implementation Council (PIC), the body of representatives of countries and international organizations overseeing the peace in Bosnia, meets to discuss what is widely regarded as the worst crisis since the end of the war.

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Reporting by Daria Sito-Sucic; Editing by Nick Macfie

Our Standards: Thomson Reuters Trust Principles.

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