Balkanalysis.com

A Questionable Tax Policy in Bosnia

This article, from Antiwar.com columnist and native of Bosnia Nebojsa Malic, raises doubts over a recent tax policy passed in the Balkan’s most celebrated (still) quasi-protectorate. According to AFP, the Prime Minister of the central Bosnian government and his cabinet submitted a collective resignation today because the legislature passed a tax bill not to their liking.
The AFP story suggests that PM Adnan Terzic favored a two-tiered “value added” (i.e. sales) tax, exempting certain goods, but the legislature passed an across-the-board tax of 17%. However, the Associated Press reports that Terzic - along with the Empire and the IMF - supported the flat rate and opposed the exemption for bread, cooking oil, milk and books, which was in the new law.

Terzic’s excuse for opposing the exemption - and that of his international masters - is that it would “encourage corruption.” That is true, in a sense. What greater corruption is there than imposing a seventeen percent tax on everything in Bosnia, to fund the central government?! Such confiscation of wealth gives more power to the government, which in turn produces an incentive to control the government and profit from it. Not only will this tempt government officials to “look the other way” for favored tax-evaders, it will promote ethnic conflict as Bosnia’s three main communities argue over “their cut” of the government pie.

Bosnia has been devastated by war, saddled with an oppressive bureaucracy, foreign military and political occupation, and the worst statist concept of government - and is naturally wallowing in crushing poverty as a result. So of course, the only way to promote economic growth is to add a tax? This beggars belief. Any tax is economically harmful; all prices will rise by at least the amount of the tax, making goods and services more expensive and thus scarcer. An increase in cost of doing business perforce means less business.
Sure, seventeen percent isn’t the worst tax rate in the world; next-door Croatia has it at 22% (though it also has exemptions). It’s about on par with Canada’s HST, but it’s much higher than the highest state/local sales tax in the United States (11%, in Alabama). But Comparative Taxation means little in the economic black hole that is Bosnia. While 17% of nothing is still nothing, 17% of very little is a lot - if you’re the one paying.

Most of all, though, this tax is morally wrong. What gives the Bosnian state the right to claim a portion of every transaction on its territory? Does it by any chance provide a system that protects property and enforces contracts, so that people feel safe doing business in Bosnia? Yeah, right.

So, the real news isn’t Terzic’s resignation - which, by the way, did not stop him from traveling to Saudi Arabia today at taxpayers’ expense - but that this lousy tax has been introduced in the first place. Instead, the Western media focus positively on the man who wishes to slap that tax on food and books. Anyone surprised?