Characteristics of Value Added Tax in Bosnia and Herzegovina

Abstract

In every national economy primary role of the fiscal system is to provide public revenue to finance public needs. In addition, fiscal system has also the task to achieve appropriate economic goals such as export promotion, investment growth, and development of SME. Taxes represent one of the most important instruments for achievement of these goals. Introduction of Value Added Tax in Bosnia and Herzegovina has caused slight inflation on the one hand, while on the other hand has helped increase export, increase collection of tax revenues, regulate economic area creating more favorable legal and economic environment, which improved the basis for further economic development. Indirect Taxation System of Bosnia and Herzegovina has conducted successful introduction of new tax system, which replaced sales tax applicable at that time. This step was rated as one of the key steps for the establishment of single economic area, reduction of the grey economy, and promotion of foreign investments and reduction of the foreign trade deficit. First part of this paper analyzes the concept of value added tax, followed by short history of origin of this form of tax. Further we elaborate basic characteristics of Value Added Tax in Bosnia and Herzegovina, explaining in more details the essence of the term VAT, types of VAT rates, as well as the influence of this measure of fiscal policy to the economic growth and development of Bosnia and Herzegovina. We will overview all the advantages and disadvantages of single VAT rate being applied in our Country.

DOI: 10.5901/mjss.2015.v6n2s2p79