Bosnia and Herzegovina (BiH) kicked off 2025 with a slight increase in indirect tax revenue, signaling stability in the country’s tax collection system. But how does this impact the economy, and where is the money going? Let’s break it down.
Revenue Growth: A Small but Steady Increase
In January 2025, BiH collected 880 million KM in indirect taxes, up by 1.25% (11 million KM) compared to January 2024. While not a massive surge, this growth indicates steady financial health in the country’s tax system.
After refunding 180 million KM in VAT to eligible taxpayers, the net revenue for distribution among government institutions, entities, and the Brčko District amounted to 700 million KM.
Where Did the Money Go?
The funds were allocated as follows:
- State Institutions: 82 million KM
- Federation of BiH: 369 million KM
- Republika Srpska: 207 million KM
- Brčko District: 21 million KM
Despite the overall revenue growth, the distribution to entities saw slight declines compared to the previous year.
How Does This Compare to Last Year?
A closer look at the numbers reveals some mixed trends:
| Entity | Allocated Funds (2025) | Allocated Funds (2024) | % Change |
|---|---|---|---|
| Federation of BiH | 264 million KM | 275 million KM | -4.21% |
| Republika Srpska | 147 million KM | 155 million KM | -4.96% |
| Brčko District | 19 million KM | 20 million KM | -2.38% |
While indirect tax revenue grew slightly, the allocated amounts to entities decreased, possibly due to external debt repayments or policy changes.
Road Tax Contributions
In addition to standard tax allocations, BiH collects a special road tax (0.25 KM per liter of fuel) to fund highway construction and road reconstruction. In January 2025, this tax generated:
- Federation of BiH: 20 million KM
- Republika Srpska: 13 million KM
- Brčko District: 675,000 KM
A portion of these funds is kept as a reserve for future road projects.
What This Means for Businesses and Citizens
For businesses, stable indirect tax revenue means predictability in VAT policies, which helps with financial planning. For citizens, road tax investments could lead to better infrastructure, improving transportation and logistics across the country.
While some entities received slightly less funding than last year, the overall increase in tax revenue suggests economic resilience and efficient tax collection.
Final Thoughts
Bosnia and Herzegovina’s indirect tax revenue remains stable, with a modest increase in 2025. However, the redistribution trends and external debt commitments will shape future fiscal policies. Monitoring these trends is crucial for businesses, investors, and policymakers looking to navigate BiH’s economic landscape.
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