Hadžić: Abolish excise duties on fuel, increase the tax-free income threshold to one thousand marks

SARAJEVO, (Patria) - The standard of living for residents of Bosnia and Herzegovina was not high even before the major wave of price increases, especially when compared to the European Union, but in the last year, and even more so in the past year, it has further deteriorated.

Due to systemic problems in this country, corruption, clientelism, and the absence of any reforms, the most relevant international institutions have warned us about the very likely increase in poverty in the country during the pandemic. Thus, due to the pandemic and the inaction of the authorities to help citizens during inflation, we are at great risk of a significant increase in poverty.

- The rise in prices - inflation, continues to move upwards, which we can all notice during shopping. While on one hand we have citizens complaining about rising prices, on the other hand, the government boasts about record tax revenues, primarily VAT, which is a direct consequence of rising prices. Inflation itself is a dangerous economic phenomenon, as it is influenced not only by the current rise in prices but also by future expectations. This particularly applies to trade unions, which will soon demand higher wages for their members, where the demands will be formed not only based on the current increase but also on future expectations, believes Faruk Hadžić, a macroeconomic analyst.

A series of measures

The pressure to increase wages, he continues, can overnight put decision-makers in a situation where the growth of tax revenues due to inflation will no longer be sufficient to cover the demands of budget users for an increase in their wages, which means less money for other budget categories, such as pensioners.

- I appeal to the decision-makers to at least do what they can, such as temporarily abolishing the collection of excise duties on fuel that go into the budget (0.30 marks per liter for diesel, 0.35 marks per liter for gasoline 95, and 0.40 marks per liter for gasoline 98). This way, the current price would be reduced to around 2.15 marks per liter for diesel, which would partially offset the rise in energy prices, says Hadžić.

Given the growth of revenues in the budgets, I also appeal to increase the tax-free income threshold to one thousand marks, which will increase the net wages of workers.

- You can help pensioners by adjusting their pensions to the rise in the cost of living, as pensioners spend most of their pensions on food. If you are already taking more VAT on food from them due to inflation, it is only fair that it is returned to them through higher pensions, explains Hadžić.

Doing nothing is the worst

He also states that price controls make no sense and can only be a populist measure and an illusion that something is being done, and in practice, it can only cause shortages. The same applies to limiting margins - when you limit margins, the price increase will not stop, because only the profit of the trader has been limited, and certainly not the purchase price of, for example, flour.

- The worst thing is to do nothing, because this problem will not solve itself over time, concludes Hadžić.

(Dnevni.ba)