SARAJEVO, Bosnia (October 27,2008) - The European Commission has halted projects for Bosnia worth 50 million Euros, until Bosnia cancels or refunds taxes on grants and donations.
The dispute was triggered after Bosnia on June 16 signed a key pre-membership deal,called the Stabilisation and Association Agreement, with the European Union which stipulates that the country should either cancel taxes on, or allow the swift refund of taxes collected on pre-accession funds, Zara Halilovic from the Bosnian Directorate for European Union Integration said.
Bosnia still has no legislation that would allow the tax exemption for donations and grants. For years this has been a stumbling block and the source of major frustration for many international organisations which were forced to pay taxes on any money they provided for Bosnia.
Local legislation does stipulate the possibility of refunding taxes paid on donations and grants but the procedure is lengthy and complicated. As a result, the European Commission has halted tenders for its pre-accession projects for Bosnia, worth some 50 million Euros, waiting for new legislation that would finally cancel taxes on grants and donations, Halilovic said.
The spokesman for the Bosnian State Tax Administration, Ratko Kovacevic, said his organisation is ready to propose new legislation that would exempt the taxation of such funds, yet it was uncertain if and when this would be discussed by its managing board.
Analysts believe that this technical obstacle reflects the indolence and sluggishness of local governments, which is jeopardising Bosnia’s EU accession process.
Only a small fraction of reforms ,previously agreed with the EC,has been initiated or implemented by Bosnia so far. The EC Implementation Report , which will be released in November,is expected to reflect Bosnia’s poor performance on its EU path.