Corporate income tax burden for SMEs: The case of Bosnia and Herzegovina
Small and medium entreprises (SMEs) play a significant role in economic development of both advanced and developing countries. Some earlier research showed that taxation and compliance costs have a significant effect on economic growth, development and performance of the business sector. For this reason, our research focuses on tax compliance costs imposed on the SMEs in Bosnia and Herzegovina (B&H), which is a transition and post-conflict country with a complex tax system structure. This complexity is particularly highlighted in the direct taxation system, hence the focus of this research is on corporate income tax (CIT) compliance costs. Our methodology is based on simulation of tax complience costs between different entities in BiH – Federation of B&H (FB&H) and the Republika Srpska (RS). Our simulation of the CIT return of a company „X“ in line with the entity law suggests that the effective tax burden is higher in RS than in FB&H entity. This result has an important policy implication for the fiscal authorities in B&H, as very often public discourse goes in the oposite direction to our finding.