Smailbegović: Employers in FBiH seek a contribution rate of 30%, which will improve the economy in the long run

SARAJEVO, (Patria) – The Government of the Federation of Bosnia and Herzegovina adopted and sent the draft laws on contributions and income tax of FBiH to the parliamentary procedure last year, but these solutions have not yet been adopted. Adnan Smailbegović from the Association of Employers of FBiH told the Patria News Agency that the proposed legal solutions need further refinement.

“It is foreseen that the tax base will be expanded in such a way that hot meals, transportation, severance pay, and all of that would be taxed as salary. This would be taxed with contributions and would go into the pension and health fund, but the rates would naturally be reduced. The neutral rate when this is taxed would be 33 percent, as calculated by the Ministry of Finance. The government has now proposed 32.5 percent. This would mean a reduction of only 0.5, which I would say is quite symbolic. We believe that this rate should not exceed 30% and that anything above that is not a relief for the economy but rather has a neutral effect. Even with 30%, low wages are not relieved; higher wages are relieved. With 33%, low wages would be even more burdened, and that is socially unacceptable. That is our main objection,” said Smailbegović. 

He confirmed that they have held numerous meetings with political parties and clubs in the Federal Parliament and that they have “declarative support, but when it comes down to the Government and ministries, misunderstandings arise.” 

“We insist that the Law on Profit Tax be included in this package, in a way that reinvestments in companies are exempt from tax. As a financial counterweight, income tax on dividends is introduced. And that is acceptable to us. If you make a million in profit and want to invest it further in the company, you are exempt from paying tax because you are reinvesting that money. If you want to take that money for yourself because you have the right as an owner, you will pay a 10 percent profit tax and an additional 10 percent income tax. Today, you pay a 10 percent profit tax regardless of whether you invest or not, and you are exempt from paying income tax, which effectively incentivizes you to take that money into your pocket,” said Smailbegović.

Speaking about these legal solutions, he points out that it is about a more serious relief for the economy. 

“In this corona crisis, it is an additional motive because the situation is even more difficult than it was a year ago. We thought it would be done by the end of the year because these laws only make sense to start with the New Year,” he points out. 

When it comes to the minimum wage, employers are interested in it being increased as well. 

“Today, we have a minimum wage of around 408 KM, which has been in place for five or six years, and it is not realistic. Statistically, there are about 50,000 people receiving the minimum wage, of which 30,000 are self-employed. This should be formally and legally raised, and security should be created for workers that we have a minimum wage that will be more serious than these 400 KM. This is a package that should be adopted in the next month and start with the New Year. It would give a new wind in the sails,” says Smailbegović. 

He explains that the authorities are afraid that there will be a decrease in revenue for the pension and health fund. 

“Everyone is now afraid of what if it decreases and there is a shortfall of 100 million for pensions, healthcare, but we had a situation in corona where in six months there was 400 million KM less in taxes, and nothing happened, pensions are paid, doctors have salaries, severance pay is paid. Those 100, 200 million will not endanger the state. 

Here, it is possible that revenues will fall in the short term for a few months, but then the results of the law will start to take effect, and revenues will begin to grow. The grey economy will decrease, wages will rise as soon as contributions are reduced, consumption will increase, VAT revenue will increase, and this is a wheel that will start to turn,” concluded Smailbegović.