Financial Crime World

Corporate Compliance Officer Roles in Bosnia and Herzegovina: Understanding the Challenges

Tax Compliance Costs: A Significant Burden

A recent study on corporate income tax (CIT) compliance costs of small and medium-sized enterprises (SMEs) in Bosnia and Herzegovina has shed light on the complexities of regulatory compliance in the country. The research, led by Vernesa Lavic from the University of Sarajevo, aimed to identify factors affecting CIT compliance costs among SMEs in Bosnia and Herzegovina.

  • The study found that the average share of tax compliance costs in SME revenues is 8.3%, indicating a significant burden on businesses.
  • Regression analysis revealed that tax compliance costs are regressive, dependent on company age, location, business activity, and whether companies hire external consultants.

Regulatory Complexity: A Challenge for Businesses

The study’s findings also underscore the challenges faced by businesses in navigating regulatory requirements. Many respondents expressed doubts about the purpose of the survey, refusing to provide accurate data due to concerns about sharing sensitive information with strangers over the phone.

  • This highlights the need for policymakers to simplify regulations and improve communication channels between regulatory bodies and businesses.
  • Currently, there is no literature that quantifies CIT compliance costs at both the country level and entity level (Federation of Bosnia and Herzegovina and the Republika Srpska).

Recommendations for Policymakers

Based on the study’s findings, policymakers in Bosnia and Herzegovina are advised to:

  • Design fiscal policies that reduce the tax burden on SMEs: This can be achieved by introducing general tax incentives applicable to multiple activities and categories of enterprises.
  • Introduce harmonization of entity tax laws with international practices and accounting standards: This will promote a more favorable business environment in Bosnia and Herzegovina, attract foreign direct investment, and contribute to increased competitiveness in the domestic, regional, and global markets.

By implementing these recommendations, policymakers can create a more conducive business environment that promotes economic growth and development in Bosnia and Herzegovina.