The following paper deals with the fiscal federalism in Bosnia and Herzegovina (BiH). Besides a detailed description of the development of the fiscal federalism in BiH since the Dayton peace process, the main focus of this paper is to illustrate how the public finance system in BiH is designed and what the main differences between the Republika Srpska and the BiH Federation are. We analyse the revenue disparities between the cantons and their respective municipalities, which are boosted by the origin or rather the derivation principle in tax collection, and present an equalisation system based on the VAT, which can minimise the fiscal gaps mainly in the Federation of Bosnia and Herzegovina (FBiH). Moreover, this paper highlights the successful process and the unsolved problems of the recently introduced Value Added Tax in BiH. Especially the VAT introduction, the common Governance Board, the Indirect Tax Administration (ITA) and the newly formed common army and police force could be interpreted as signs of stabilisation for this fragmented federation. Although these are milestones of a peaceful coexistence between Moslem Bosniacs, Orthodox Serbs and Catholic Croats, the Bosnian fiscal federalism has only been partly achieved.
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Paper provided by Institute of Local Public Finance in its series Working Papers with number
01-2006.
Find related papers by JEL classification: H7 - Public Economics - - State and Local Government; Intergovernmental Relations H2 - Public Economics - - Taxation, Subsidies, and Revenue H1 - Public Economics - - Structure and Scope of Government
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