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VAT Spat: Financing Bosnia

SARAJEVO, Bosnia and Herzegovina--The internal problems of the Bosnian government came to the surface last week when the introduction of a value-added tax, or VAT, put a wedge between the prime minister and the parties of the governing coalition.

Prime Minister Adnan Terzic of the Bosniak (Bosnian Muslim) Party of Democratic Action (SDA), offered his resignation on 5 November after the lower house of parliament failed to endorse his proposal for a single VAT rate of 17 percent and voted for a two-tier system instead.

The possible fall of the government jolted the collective presidency and the coalition parties into a U-turn: they rejected Terzic’s resignation and vowed to support the government’s VAT bill.

The introduction of a single-rate VAT to replace the current turnover tax, from which most basic consumer items are exempt, has led to a shrill public debate and intense political wrangling.

(TOL 15.xi.04)

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