In many countries, tax incentives are a popular means to achieve political, economic and social objectives. Their aim is to reach and accelerate certain activities of public interest. Furthermore, one of the objectives is to accelerate the development of a certain industry and influence the growth of research and investment in foreign capital. Innovation is the key element that helps a company achieve competitive advantage. Global competition is forced to offer unique products with added values on the market. Tax incentives for research and development are an important factor of innovation. This paper aims to present the importance of research and development, as well as the role of tax incentives. States should use their fiscal policy to stimulate investment in research and development through various forms of tax relief. The Republic of Croatia applies tax incentives for research and development, but to a significantly less extent than other European Union countries.
Background: In recent years’ income inequality has been an economic issue. The primary instrument for redistributing income is personal income tax. However, based on economic theory income inequality concerns indicators such as wages, transfer payments, taxes, social security contributions, and geographical mobility. Objectives: The objective of this paper is to examine the impact of certain labor market indicators on personal income taxation in Federation of Bosnia and Herzegovina (FB&H). Methods/Approach: Since personal income taxation consists of a very broad definition and for the purpose of this research only, income from dependent (employment) activity is observed. The econometric analysis is conducted using error correction modeling, as well as forecast errors variance decomposition. Results: The error correction model is estimated, and the cointegrating equation indicates that monthly wage and number of employees statistically significantly positively affect personal income taxes in FB&H in the long-run. After two years, the selected labor market indicators explain a considerable part of forecasting error variance of personal income tax revenues. Conclusions: The implementation of reforms in the labor market and tax policies of the FB&H is suggested. In order to achieve necessary reforms, efficient governance and general stable political environment are required.
Dubravka Jurlina Alibegović, Sabina Hodžić and Emira Bečić
The role of local government units and the level of fiscal autonomy are the main drivers of local development activities in countries. The aim of this paper is to measure the level of fiscal autonomy of large cities that have been identified as conductors of local development activities in three Southeastern European (SEE) countries, namely Croatia, Serbia and Bosnia and Herzegovina, as well as to compare the level of fiscal autonomy between large cities and other remaining local units in the respective countries. The results of the research measured by the index of fiscal autonomy and compared with the index of fiscal autonomy of all remaining local government units in each of these countries indicate limited fiscal autonomy. Th is research provides new scientific evidence and fills the gap regarding the level of fiscal autonomy of large cities to improve and increase their budget capacity.