Bosnian Tax Office Goes Digital

The Tax Administration in the BiH entity of Republika Srpska had run out of physical space to store official documents.
The Tax Administration in the BiH entity of Republika Srpska ran out of physical space to store official documents.
USAID Fiscal Sector Reform project
Taxpayers, employers and collectors save time, money, space and headaches
“We now have electronic tax returns and archiving, which will lead to significant savings.”

April 2018 — The fiscal sector of Bosnia and Herzegovina (BiH) has come a long way since the United States helped restructure the country’s foreign debt right after the war in 1996. But until recently, government institutions relied on outdated manual systems for filing taxes and storing records, involving mounds of paper and waiting in long, slow lines.

Those days are finally coming to an end in Republika Srpska (RS), where USAID has established an online system for filing taxes and a digital system for archives. (The country’s governance is divided into two legal entities — the Republika Srpska and the Federation of BiH.) Today in RS, the previous systems seem as archaic as the caveman using a boulder as a front door.

Tax Reporting and Filing

“We now have electronic tax returns and archiving, which will lead to significant savings,” says RS Tax Administration Director Zora Vidović.

With USAID’s help, the RS Tax Administration established an online e-filing system for all payroll taxes, including social security contributions, and personal income tax returns. Since January 2017, all employers and taxpayers are required to report and file taxes online only.

Generating tax revenue is difficult enough in BiH. Doing it in a way that is efficient and does not overburden businesses or citizens is harder still.

“Electronic submission of 1002 tax declaration forms made our work significantly easier,” says Predrag Vidović, a certified accountant at Aktivo, an accounting agency in Banja Luka. “We no longer have to waste time printing multiple copies of the forms and then going to the Tax Administration and waiting in line to submit them.”

Ilinka Gavrilovic, a tax expert at M:tel Co., said that submitting monthly tax declarations electronically not only saved time, but also reduced costs incurred for printing the forms and delivering the statements to the Tax Administration for verification. For M:tel, the printed 1002 tax declaration form contained over 100 pages for 2,100 employees in 57 municipalities.

“The data validation process is particularly important for large taxpayers such as M:tel Co.,” Gavrilovic said. “This means that mistakes detected in the statements are immediately and simply resubmitted and removed before being transferred to the Tax Administration’s server.”

The new system has led to savings of close to 800,000 Bosnian convertible marks (BAM) per year ($507,000) for RS employers and approximately 500,000 BAM ($317,000) per year for the RS Tax Administration.

Archiving Tax Records

USAID also introduced state-of-the-art electronic archiving in the RS. Until December 2017, archiving of tax documents was done strictly with paper forms, an inefficient and cumbersome system that made it difficult to manage tax data and caused undue hardship for citizens and businesses when archives were misplaced or damaged. Meanwhile, the RS Tax Administration had run out of physical space to store all these documents.

Official documents fill the hallways of the RS Tax Administration in Bosnia and Herzegovina.
Official documents fill the hallways of the RS Tax Administration in Bosnia and Herzegovina.
USAID Fiscal Sector Reform project

Now they are being digitized with an e-signature that makes them official and valid in the courts. Over 1.5 million forms have been e-archived so far, and the new system has been expanded to include payroll forms as well. This will not only improve document security and transparency, but will save the RS Tax Administration close to 300,000 BAM ($190,000) per year in storage fees — just for the documents already digitized.

Email

USAID is also developing and installing an electronic mailbox to enable direct and easy communication between taxpayers and the RS Tax Administration.

“During 2018, the electronic mailbox should be in operation, which will serve as a tool for safe two-way communication between taxpayers and the Tax Administration,” says Vidović.

These achievements are just a few of the goals of USAID’s Fiscal Sector Reform project, which runs from 2014 to 2019. The project is designed to increase tax compliance, simplify the business regulatory environment, and strengthen fiscal discipline, which will make Bosnia and Herzegovina more attractive to foreign and domestic investors. USAID’s fiscal sector work also increases transparency and reduces opportunities for corruption.

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Last updated: April 09, 2018

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