Bosnia and Herzegovina to end gambling VAT exemption in 2026

Legislators in Bosnia and Herzegovina have introduced an initiative to eliminate the value added tax exemption for gambling activities at the state level beginning in 2026. The move is driven by concerns over tax fairness and social impact and is designed to direct increased revenues to healthcare and other public interest areas.

The proposal was formally submitted by Mia Karamehić Abazović, a member of the House of Representatives of the Parliamentary Assembly of Bosnia and Herzegovina, together with Amir Purić, a member of the Parliament of the Federation of Bosnia and Herzegovina, representing the social liberal political party Our Party.

Proponents assert that the current tax framework unfairly favours the gambling sector and deprives the state and local communities of significant revenue that could support essential public services. Opponents argue that previous attempts to introduce similar tax changes have faced legal and technical challenges.

Background on VAT and Gambling in Bosnia and Herzegovina

Bosnia and Herzegovina currently exempts the gambling sector from paying value added tax at the state level. This means that gambling operators such as betting firms and casinos do not add VAT to their taxable revenues, unlike many other goods and services. Critics have said this policy creates an imbalance in the tax system because other products associated with social harm, such as alcohol and tobacco, are subject to both excise duties and VAT.

VAT in Bosnia and Herzegovina is normally applied to most goods and services at a standard rate. The Indirect Taxation Authority manages VAT administration nationally under a uniform legal framework. Recent amendments to the VAT law have addressed broad compliance and procedural matters, but lawmakers have been debating whether gambling should be subject to standard VAT like other sectors.

In the proposal submitted in January 2026, lawmakers emphasised that gambling stands apart from other taxable industries in both legal status and social impact. They argue that the exemption lacks a clear fiscal or legal basis and should be eliminated to align tax treatment more consistently with the observed economic and social costs associated with gambling activities.

Unequal Treatment and Social Concern

During the parliamentary presentation, Karamehić Abazović strongly criticised the existing exemption. She contended that it is anomalous that gambling, despite being a legal activity linked to addiction and social harm, continues to enjoy favourable tax treatment. In her remarks she said:

“Today, games of chance are the only legal activity that creates addiction…and is not taxed at the state level. Alcohol and tobacco products, on the other hand, are taxed with both excise taxes and VAT precisely because of the harmful consequences they have on citizens’ health.”

The lawmaker stressed that there was no financial, legal or social justification for maintaining this tax advantage in comparison with other sectors. She pointed out the inconsistency of imposing VAT on essential goods and services such as food, medicine and books while exempting gambling, an area she described as “producing serious health and social consequences.”

Karamehić Abazović also noted that the exemption does not align with the underlying principles of Bosnia and Herzegovina’s VAT system, since gambling is not a financial service, insurance service or a service of general public interest. This argument sought to underline the incongruity between the legal framework and current market practices.

Financial Impact and Redistribution of Revenue

Amir Purić focused on the fiscal implications of ending the VAT exemption. He noted that the Federation of Bosnia and Herzegovina, one of the country’s autonomous entities, currently receives a small fraction of the revenue generated by the gambling industry. According to Purić, the industry’s annual turnover in the Federation exceeds 1.8 billion convertible marks, yet the public budget receives less than 35 million convertible marks from this activity.

The lawmakers’ proposal includes amendments to the Federation’s Gambling Act that would significantly increase the tax contribution from the sector. Under the plan, the Federation’s revenue share from gambling taxation would rise to at least 150 million convertible marks per year, with an additional 50 million convertible marks directed to local communities. This substantial increase is intended to support key public policy priorities.

Purić highlighted how the additional revenue could be channelled into critical areas such as support for oncology patients, treatment initiatives for serious and rare diseases and programmes that address compulsive behaviour. Funding could also bolster medical equipment procurement and further investments in science, culture, sports and entrepreneurship.

Advocates framing these fiscal redistributions stress that the changes would provide a more stable and long term source of funding for healthcare infrastructure and social services rather than relying on existing revenue streams alone.

Past Proposals and Legislative Challenges

The idea of altering the tax treatment of gambling in Bosnia and Herzegovina is not entirely new. In 2025, Dennis Gratz, a member of the Democratic Front party, proposed a distribution model for gambling tax revenues. His model envisioned allocating 60 percent of the revenue to the Federation’s treasury, 20 percent to social initiatives and 20 percent to specialised healthcare treatment. That proposal, however, did not move forward through the legislative process and no formal changes occurred.

The renewed focus on ending the VAT exemption reflects continued debate over how best to balance industry regulation with public benefit. Some analysts have pointed out that previous attempts to bring gambling into the VAT net encountered resistance. In particular, earlier proposals faced questions over whether gambling revenues were suitable for VAT taxation, which typically treats gambling outside the standard VAT base. Others also questioned whether it is practically feasible to determine a taxable value added from gambling services.

Criticism and Industry Response

Despite the push from lawmakers in Our Party, the proposal has drawn criticism from industry representatives and commentators. Critics describe the initiative as politically motivated rhetoric rather than sound fiscal policy. Some argue that lawmakers lack a technical grasp of tax policy fundamentals and may be using the measure to attract public attention ahead of upcoming elections. One industry representative was quoted describing the proposal as misconceived and questioning the legislative basis for imposing VAT on gambling revenues.

These critics also contend that imposing VAT on the gambling sector may create administrative challenges and lead to legal disputes, particularly if the tax base cannot be clearly defined under current law. The history of VAT policy in Bosnia and Herzegovina includes multiple revisions and clarifications over time, reflecting the complexity of applying VAT consistently across diverse economic activities.

Larger Social and Economic Context

The debate over gambling taxation in Bosnia and Herzegovina comes at a time when the country is navigating broader fiscal and social challenges. With public services such as healthcare under increasing pressure, lawmakers have sought sustainable revenue sources without placing undue burden on citizens. The question of whether gambling should be taxed like other sectors is part of wider discussions about fairness, public health policy and economic regulation.

Proponents of the tax change argue that it creates a mechanism for policymakers to address social costs without direct cuts to essential services or increases in general taxes. They assert that utilising gambling revenues for social good aligns with global trends in public finance, where revenues from sectors with potential harm are redirected to protective or remedial public programmes.

Next Steps in the Legislative Process

The proposal to eliminate the VAT exemption for gambling has formally entered the parliamentary process. It will require review by relevant committees and both chambers of the Parliamentary Assembly before it can become law. Parliamentary debate is expected to consider the fiscal, legal and societal implications of the measure.

Observers note that discussions will also likely include input from stakeholders such as industry representatives, tax experts, healthcare advocates and civil society groups. Should the amendment pass at the state level, corresponding changes to the Federation’s Gambling Act will need approval at the entity level, making this a multi‑stage reform process.

The coming months of legislative activity will therefore be critical in determining whether Bosnia and Herzegovina moves forward with ending the VAT exemption for gambling.

Conclusion

The proposal to end the VAT exemption for gambling in Bosnia and Herzegovina represents a significant step toward fiscal fairness and responsible governance. By aligning the taxation of gambling with other sectors, lawmakers aim to address longstanding inconsistencies in the tax system while generating substantial additional revenue for public services. If implemented, the increased funds could strengthen healthcare, support vulnerable populations and foster broader social initiatives, reflecting a policy approach that balances economic regulation with public welfare. While debates over the feasibility and political implications of the measure are likely to continue, the initiative underscores the growing recognition of the social and financial impact of gambling and the importance of fair, transparent taxation in advancing national priorities.

Frequently asked questions

What is the proposed change to gambling taxation in Bosnia and Herzegovina?
Lawmakers have proposed eliminating the value added tax exemption for gambling activities at the state level starting in 2026 so that gambling will be taxed like other economic activities.

Why are lawmakers seeking to end the gambling VAT exemption?
Proponents argue that ending the exemption promotes tax fairness and allows the government to direct more revenue to healthcare and other public services.

Who introduced the proposal to change the VAT treatment of gambling?
The proposal was introduced by lawmakers Mia Karamehić Abazović and Amir Purić from Our Party.

How much revenue does the gambling industry generate in the Federation of Bosnia and Herzegovina?
The industry’s annual turnover in the Federation is estimated at around 1.8 billion convertible marks, but the public budget receives a much smaller portion under the current system.

What would the additional revenue be used for?
The additional revenue is intended to support healthcare services like oncology treatment, rare disease care and programmes addressing compulsive behaviour and to fund other public interest areas.

Has a similar proposal been made before?
Yes, a previous proposal suggested redistributing gambling tax revenue among the treasury, social initiatives and specialised healthcare, but it did not progress through the legislature.

What arguments do opponents of the proposal make?
Opponents have questioned the feasibility of applying VAT to gambling and argued that the move may be politically motivated, with unclear tax base definitions.

Will this change affect all forms of gambling?
If adopted, the change would apply to all gambling activities that currently enjoy exemption from VAT at the state level.

Does the proposal affect taxation in Republika Srpska?
The current proposal focuses on state‑level VAT rules and amendments to the Federation’s Gambling Act; changes in Republika Srpska would involve separate entity‑level legislation.

What are the next steps in the legislative process?
The proposal must be reviewed and approved by parliamentary committees and both chambers of the Parliamentary Assembly before becoming law.