Changes to the Income Tax Law discourage new marriages

SARAJEVO, (Patria) - On behalf of the Association of Families with Three or More Children "Families Three Plus", we express great concern regarding the new Proposal of the Law on Income Tax and Contributions, which has been sent to the parliamentary procedure.

In a time of financial challenges and demographic catastrophe in the Federation of Bosnia and Herzegovina, there is a greater need than ever for support for families with children. However, by adopting the Proposal of the Law on Income Tax, support for families would be abolished, its current pro-natalist character would be lost, and childbirth would be discouraged, as it completely entails the abolition of the relief for persons with children, placing them in a subordinate position compared to persons without families. Furthermore, the new law also discourages marriage, especially in situations where one spouse is unemployed.

Namely, the new proposal of the law abolishes Article 24 – coefficients of deduction for a dependent spouse and for each child, so the tax base is now the same for everyone at 800 KM. In addition, according to the proposed amendments to Article 12, the tax rate is the same for everyone, i.e., 13% instead of 10%. This means that by abolishing the personal deduction coefficient for supporting a spouse and children, the tax amount increases, and consequently, the salary decreases. The law stipulates that tax is calculated on the net salary of employees, so with the proposed amendments to this Law, a father whose wife is unemployed pays the same tax as someone who has no children and is not married. The adoption of this Law would directly impact the expenses of families with children. Thus, a father with a salary of 1,800 KM who supports his wife and, for example, four children would have a monthly salary 204.45 KM lower than under the current law, which amounts to 2345.88 KM annually, compared to a single person with no children.

Given that such an approach represents a significant financial blow to families and takes support for natalism and family protection several steps backward, we ask you to take all necessary actions to prevent this from happening. Furthermore, it is necessary for you, as a responsible body, to offer solutions that would further support families with children, especially young families.

We propose that Article 24 of the Law, which regulates the deduction coefficient for supporting a spouse and children, where the deduction coefficient increases for a spouse and each subsequent child, be retained in the Law, which would increase the personal income. We also propose that the current tax rate of 10% be applied to resident families instead of the proposed 13%.