In the Federation of Bosnia and Herzegovina, a serious disproportion in the treatment of the private and public sectors has long been noticeable, especially when it comes to paying taxes and contributions.
This problem is not only a question of economic policy, but also of legal and moral equality before the law. While the private sector regularly fulfills its obligations to the state, public institutions and companies often behave as if the laws do not apply to them.
The public sector as the main debtor
According to the data of the FBiH Tax Administration, the public sector is the main source of unpaid or irregularly paid contributions. Many public companies, including mines, public utilities and hospitals, are continuously accumulating debts to the state. This is a problem that has been ignored for years, which has serious consequences for fiscal stability, but also for the legal equality of economic entities.
An example from 2021 clearly illustrates this problem: the FBiH Tax Administration blocked the accounts of several mines due to non-payment of contributions. However, the very next day, the Federal Government ordered the unblocking of the account, which enabled the continuation of business.
Effectiveness of private sector monitoring
The Tax Administration of the Federation of Bosnia and Herzegovina can establish information that the employer has paid the employees a salary without calculating and paying contributions for pension and disability insurance, health insurance and unemployment insurance in the inspection process or if workers report that they have paid wages, without having been paid their contributions at the same time.
The Tax Administration of the Federation of Bosnia and Herzegovina conducts daily office and field inspections of the legality of taxpayers’ operations, within which, among other things, the calculation and payment of contributions are controlled. The inspection annually conducts an average of over 7,000 inspections.
In 2023, due to established irregularities, 4,256 misdemeanor orders were issued and fines in the amount of 9,677,122 KM were imposed.
Fines are prescribed by law for non-payment of contributions. A fine in the amount of 1,000 KM to 5,000 KM will be imposed for the violation of the employer, if he does not pay the contributions simultaneously with the payment of the salary, and no later than the last day of the month in which the salary is due for payment.
A taxpayer, a natural person, will be fined if he does not pay contributions by the 10th day of the month for the previous month. The payer of income from another independent activity or from occasional non-independent work will be fined if he does not pay the contributions before the payment, and at the latest at the same time as the payment of the income.
A legal entity and a natural person who independently performs an activity will be fined if, as a payer of wages, as well as a natural person on his own, he does not submit to the Tax Administration of the Federation of Bosnia and Herzegovina within the prescribed period the specification with the payment of wages and the specification with the payment of the entrepreneur’s contribution.
Data confirming the problem
According to the table of the largest tax debtors in the Federation of Bosnia and Herzegovina, it is clear that public companies and institutions are at the top of the list.
For example, the FBiH Railways owe over 154 million KM, while the University Clinical Hospital Mostar has a debt of more than 115 million KM. In addition to them, mines under the management of Elektroprivreda BiH and other public entities have accumulated multimillion-dollar debts.
While private firms face severe fines and account freezes for even minimal tax delays, the public sector enjoys a privileged position. Such treatment not only demotivates private employers, but also undermines citizens’ trust in the legal system. Fiscal policy should be equal for all, but current practice indicates favoring the public sector at the expense of the private sector.
The private sector, which employs a large number of citizens and generates a significant part of budget revenues, demands equal treatment. Its representatives have been pointing out discrimination and injustice for years, but the authorities do not seem to listen to these demands.
Ad hoc decisions of the Government
The Government of the Federation of Bosnia and Herzegovina occasionally intervenes to solve the problems of unpaid contributions, but these interventions are mostly ad hoc in nature and do not solve systemic problems. Thus, at the end of 2024, the Federal Government provided KM 1.4 million for tying up the length of service for 118 workers, of which 85 were from public and 33 from private companies. These funds were distributed to the workers of companies such as Vitezit, Željezara Zenica, Zraka, IP Krivaja, Konfekcija Borac, BNT-TMiH, TRZ Hadžići and Hidrogradnja Sarajevo.
Non-payment of public sector contributions has far-reaching consequences. First, the amount of funds in social security funds is reduced, which directly threatens pensions and health care. Second, unfair competition is created because private firms have to bear the burden that the public sector avoids.
In addition, citizens who are employed in the private sector often have lower wages and worse working conditions, but regularly pay taxes and contributions. In contrast, public sector workers have guaranteed wages, but are often victims of a system that does not pay their contributions regularly.
The need for reforms
Solving this problem requires serious reforms in fiscal and legal policy. First, it is necessary to ensure strict application of the law and sanctioning of all entities that do not pay contributions, regardless of whether they are in the public or private sector. Second, the government must take responsibility for the debts of public companies and develop a plan for their financial consolidation.
In addition, transparency in the operations of public institutions must become a priority. Regular publication of data on the financial condition of public companies and their compliance with legal obligations would be the first step towards restoring confidence in the system.
Also, the private sector should be involved in the process of adopting fiscal and economic policies in order to ensure a balance between all economic entities.
It’s no secret that the latest decision of the FBiH Government to raise the minimum wage to 1,000 KM, which means almost 800 KM in contributions, will further strengthen this gap and further burden the private sector, while the public sector will certainly “profit” because for many public companies, paying contributions is a second-category obligation .
Discrimination of the private sector in relation to the public sector in the Federation of Bosnia and Herzegovina is a serious problem that requires the urgent attention of competent institutions. A fair and efficient legal system, with consistent application of the law, is the key to creating equal conditions for all subjects. Without that, “economic injustice” will continue to undermine trust in state institutions and threaten the stability of the entire system, he writes Klix.
