Many companies in Bosnia and Herzegovina donate food to soup kitchens and associations that care for people in need, and they would do more if the government stimulated this type of charity through the tax system.
The analysis “Exemption of food donations from VAT”, which was done by PhD in Economics Faruk Hadzic within the initiative “Reduce food waste – donate it”, showed that in 2020, the value of donated food is 82.7 million BAM, of which 12.01 million BAM went to VAT.
Such high tax costs are one of the main reasons why instead of donating to companies, they decide to destroy food in order not to endanger their business and jobs. In that way, both society and the government are at a loss.
In direct conversations with representatives of the company, it was found that the estimated value of destroyed food in 2020 amounted to 126.6 million BAM. So, the food of the stated value was not donated, but destroyed!
The exemption of food donations from VAT opens the possibility that a significant part of the food that is now being destroyed, will be directed to those who need it the most. With this measure, companies would not have the cost of destroying food, which ultimately increases the base for paying income taxes, which would benefit everyone: the country, companies, soup kitchens and end users.
The author explained three possible scenarios regarding the exemption of food donations from VAT: leveling of food prices before the expiration date, introduction of 0% VAT for all food donations and introduction of 0% VAT for food donations before the expiration date.
During consultations with representatives of the Indirect Taxation Authority who show readiness to support this initiative, the introduction of 0% for food donations before the expiration date was identified as the most feasible scenario, which could be part of the new draft VAT Law.
“In the third scenario, in which food donations would be exempt from VAT before the expiration date, soup kitchens and associations would benefit the most, which could receive donated food in the estimated value of 126.6 million BAM, while the state in this case would not charge any additional amount of VAT. In this way, the company would save the costs of destroying food in the amount of at least 6.33 million BAM“, the analysis explained.
It was especially emphasized that the state would have an indirect benefit at all levels of government, more precisely in all budgets, because the amount provided so far for food donations in money could be directed to additional provision of several meals or procurement of equipment necessary for soup kitchens, especially bearing in mind that it is realistic to expect that the number of users of soup kitchens will increase due to the negative effects of inflation and the possible slowdown and decline of the economy, which will affect low-income citizens.
If you are interested in more information and information collected within the analysis, please contact nikogladan@mozaik.ba.
Initiative “Reduce food destruction – donate it!” is part of the “Legal Framework for Philanthropy” Program implemented by the Mozaik Foundation together with partner organizations (Hastor Foundation, Association Pomozi.ba, Association Network for Building Peace, Trag Foundation and Catalyst Balkans) with financial support from USAID. The Philanthropic Forum was established within the same Program, which gathers companies and foundations in Bosnia and Herzegovina with the aim of uniting goods through strategic giving.
Source: lonac.pro
