The tax wedge in Bosnia and Herzegovina (BiH), according to international financial institutions, the EU and a part of the professional community, is excessively high, which, in their opinion, has a negative impact on the demand for labor force, stifling economic growth and promoting the growth of informal labor market.

Many current reform proposals are related to the reform of the structure of the taxation of labor and employers' relief by reducing the amount of tax wedge. Since the assessment of the excess amount of tax wedge should be considered in a comparative context, Analitika’s Fact Sheet provides an overview of the amount of tax wedge in BiH and the characteristics of its progressiveness in the two entities, as well as a comparison of the amount of tax wedge in BiH with an average height of the tax wedge in the OECD. This publication is a summary of the chapter Labour Cost in Bosnia and Herzegovina: The Cost of Labor and Taxes on Labor from the study “Flexible Labour in Inflexible Environment: Reforms of Labour Market Institutions in Bosnia and Herzegovina in Comparative Analysis”. 

This publication, available only in local languages, was prepared with the assistance of the Open Society Fund BiH, as a part of the project Reforms out of Contexts? Comparative Analysis of European and BiH Labor Markets.