Tax Authorities Seize Debtor's Property, Then Return It for "Safekeeping"!

Authorities in the Federation of Bosnia and Herzegovina must urgently take measures to address the growing tax debt, as the current enforcement procedure is not yielding expected results. The constant increase in debt could have unforeseeable consequences, according to a special audit conducted by the Audit Office of the FBiH, reports the Bosnian news agency Patria (NAP).

Auditors today published a document titled „Efficiency of Public Revenue Collection in the Enforcement Procedure Based on the Sale of Seized Property in the FBiH“, which highlights the catastrophic state of tax collection, threatening to jeopardize the functioning of the entire system.

- Although the enforcement procedure is carried out ex officio, it has not yielded the expected results. The debts of obligors are increasing, the number of cases is rising, and the amount of debt per case is also growing. Simultaneously with the increase in the number of cases and debtor debt, the estimated value of property seized in the enforcement procedure that has not been sold is decreasing – concluded during the audit.  

The audit team concludes that a special analysis should be conducted as to why 514 auctions and direct sales of seized property were unsuccessful, or even 63% in the last two years.

- To organize a sale, the Tax Administration of the FBiH incurs certain costs, and if the seized property is not sold, it only increases the debtor's debt for those costs, as well as for interest and storage costs. The question arises as to why the sale of seized property is conducted in this manner, and what are the reasons for unsuccessful sales – concluded.

Information from the end of last year, as stated, indicates the following: that debtor debt amounts to more than 1.7 billion BAM, the number of debtors is increasing, and the value of seized property is around 77 million BAM.

- The audit estimated that one of the reasons is that in most cases, office and inspection controls were not initiated in a timely manner, as there are about 57% of debtors whose collection is questionable – highlighted.

It was noted that the Tax Administration of the FBiH does not have warehouses to store unsold property, so in the previous period, it concluded contracts for the storage of property with third parties.

- Of the total property in storage, about 96% of seized property is kept with the debtors from whom this property was seized in the enforcement procedure. The audit team concluded that the exception has become the rule, as regulations stipulate that property can only be stored with the debtor in exceptional cases. The question arises as to whether a potential buyer has the opportunity to inspect the seized property if it is stored with the debtor, and how they can obtain the necessary information – ask the auditors.

As an explanation, the authorities state that they do not have a sufficient number of employees and that they are overburdened, and that due to the weight of the work, there is a „brain drain“. It was also determined that accurate data on debts, interest, and procedural costs are not maintained, reports NAP.

DATA FROM THE REPORT

• In the enforcement procedure, 68,644 initiated cases remained unfinished, or 68.6%.
• Claims from obligors amount to more than 1.7 billion BAM, and according to estimates, about 73% of total obligations relate to contributions.
• The value of seized property according to the list of the Accounting Sector is around 77 million BAM, which is about 4.5% of the total debtor debt.
• More than 17,000 procedures were initiated, about 6,500 were completed, or 37.6%, and for these procedures within the cases, over 54,000 decisions were issued.
• Of the determined amount of debt, about 10% of property was seized, and about 15% of seized property was sold for the observed period and earlier, with over 337 million BAM of property under mortgage.
• About 63% of sales of seized property ended unsuccessfully.