HORIZONTAL IMBALANCE IN BOSNIA AND HERZEGOVINA’S VAT SHARING (2006-2024): EVIDENCE FROM ADMINISTRATIVE DATA
HORIZONTAL IMBALANCE IN BOSNIA AND HERZEGOVINA’S VAT SHARING (2006-2024): EVIDENCE FROM ADMINISTRATIVE DATA

Summary/Abstract: This paper examines whether Bosnia and Herzegovina’s VAT revenue-sharing rules generate horizontal asymmetry between the Federation of BiH (FBiH) and Republika Srpska (RS). Testing relies on a transparent measure of the legally relevant base, namely destination-side VAT-able final consumption, clearly separated from where VAT is collected; in doing so, the analysis engages domestic claims of systemic disadvantage (Halilbašić et al., 2022). A measurement-first framework derives entity contribution shares from Indirect Taxation Authority (ITA) VAT returns (2006-2024) and distribution shares from ITA executed allocations (2015-2023). Comparisons are reported in share points and EUR; rigidity is tested with 2012 and 2016 anchors; a per-capita VAT-able index is constructed under plausible population splits. EUR net-position estimates are omitted because verified annual refund totals (including the reserve) are unavailable. The legally mandated audit of the VAT-base “returns” has not been performed. Evidence shows FBiH remains the majority destination (63-65%) and its share declined about 2.0 p.p. from 2006 to 2024, while RS rose around 2.7 p.p. and Brčko District fell slightly. Executed allocations track destination shares at the annual level; the persistent wedge is policy-mechanical, as BD’s fixed 3.55% of the entity pool tends to exceed its measured destination share. Rigidity is period-contingent, disadvantaging FBiH under a 2012 anchor and reversing under a 2016 anchor. A per-capita VAT-able index indicates RS convergence toward FBiH by 2024 without implying income convergence. Given unaudited inputs, the results neither prove nor rule out systemic disadvantages to FBiH. The contribution is a replicable mapping from administrative returns to coefficients, an executed-versus-destination reconciliation in shares and EUR, and a rigidity/pass-through diagnostic that separates design features from potential measurement drift. The immediate priority is an independent audit of the VAT-base “returns”; with audited inputs, publish the decomposition linking returns to coefficients, adopt explicit update triggers, and use targeted triangulation to monitor drift.

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