Economic reforms as key political responsibility

02 April 2015

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Process of forming the Government of Federation of Bosnia and Herzegovina is finally completed. Introductory presentation of newly appointed federal Prime Minister Fadil Novalić was almost entirely devoted to pressing economic challenges with a mention of several important issues that were main priorities of CPU'sadvocacy campaign in previous period.

Mr. Novalić dedicated a large portion of his introductory speech to urgent issue of reducing taxes to labor. He emphasized that one of the goals of the new government is significant reduction of gray economy which can be achieved through stimulating measures that CPU proposed and advocated within the project "ROAD TO RECOVERY: Promoting accountability and evidence-based policy making". Considering possible measures to mitigate taxes to labor, Novalić reffered to Compact for Growth and Jobs, stating that Bosnia and Herzegovinahas a very unfavorable ratio of net amount of the obligation to pay in comparison to the countries of the region - 72.17%, which his government wants reduced to 50% in the first period. CPU advocated for these measures in the pre-election and post-election period as one of the key prerequisites for reducing unemployment through analysis of "Fiscal policy in the function of economic growth and employment in FBiH".

Novalić also stated that following measures can efficiently improve collection of tax revenues: restructuring of tax administration institutions, better cooperation between entity tax administration institutions and informatization of all cantonal offices and branches. The new government also plans to introduce new forms of direct taxation, such as taxes to luxury and  taxes to real estate. This is a measure that CPU, with reference to the study by OECD, also pointed out as a necessary, as taxes to real estate are deemed as economically most efficient form of taxation, as opposed to the taxation of labor.

When it comes to reform of labor market, key word is flexibility. The most important step towards achieving this goal is, the new government claims, amending the labour law, which must facilitate the initiation and termination of employment in more efficient way. This way, the law will create space for employment opportunities, including temporary and part-time employment. The rigidity of current labor law was also recognized by CPU as a great barrier for development of creative industries in BiH with conclusion that more flexible labor legislation can give significant rise to employment rates in this field with big economic potential. The role of employment offices was also discussed - it is necessary to make them more functional so that they can commit to their primary function. This can be achieved through revising current lists of unemployed persons, developing models for financing anc co-financing of employment and self-employment, along with training and professional development, especially for young people. This topic was also on agenda of meetings that CPU held with decision-makers in post-election period.

Newly established government also plans to adress difficulties in business sector and measures have been announced to improve the business environment: resctucturing of tax administration and stimulation to emoloyers, but also identification and control of para-fiscal taxes, simplification of registration procedures for companies, limiting time needed to obtain construction permits to a month and foundation of economic courts to prevent corruption. This proves that decision-makers are paying attention to economic indicators analyzed in CPU's paper "Competitiveness of BiH economy 2010-2014", where we emphasized precisely these difficulties that entrepreneurs are facing, and continuously promoted them as priority topics in cooperation with the media. Additionaly, Prime Minister's presentation confirms that new government plans to devote special attention to natural resources, especially neglected fields of agriculture and energy. Bosnia and Herzegovina must continue to carry out obligations in order to successfully join energy community and also to keep investing in windpower, hydropower and renewable energy sources - issues that were addressed in CPU's analyses of energy sector.

CPU would like to point out the importance of work of various civil society organizations and independent intellectuals: through continuous research, advocacy and public promotion of most important issues of citizens of BiH we finally suceeded in reaching out to decision-makers and, hopefully, opened a new chapter in political life of BiH. We thank all the colleagues, domestic and foreing partners for their contribution to promoting political accountability in Bosnia and Herzegovina.

In following period, CPU plans to implement a project under the name "Monitoring of Implementation of Compact for Growth and Jobs" that will the work of government regarding priority economic issues to the public. In coopoeration with other civil society organizations we will offer the experts' suggestions and opinions to the goverment in order to find quality solutions for socio-economic issues in the country.

 

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