Bosnia tackles customs fraud

The missing customs money would help reconstruction

Bosnia's leaky customs system is to be overhauled to catch hundreds of millions of dollars in unpaid excise taxes, a top diplomat has said.

Paddy Ashdown, formerly leader of the UK's Liberal Democrat party and now Bosnia-Herzegovina's High Commissioner, told reporters that revenue was falling through the cracks between the Muslim-Croat federation and the Serb republic.

Mr Ashdown wants a customs union

"Bosnia loses a staggering 1.4bn marks (US$770m) a year to custom and tax fraud precisely because the divisions in the current system make it a playground for criminals," Mr Ashdown told reporters.

In response, a commission including one international expert and two members from each of the two entities, has been charged with creating draft laws and regulations to bring both sides under one system.

Between two stools

Bosnia has been split in two ever since the 1992-1995 war which carved up the former Yugoslav republic between Bosnian Muslims, Croats and Serbs.

Both halves of the country are struggling to fund the massive reconstruction they need, and badly need every source of revenue they can find.

The current political structure allies Muslims and Croats in a fragile republic, despite the vicious fighting between the two sides during the war.

The Serbs, whose leaders during the fighting are being sought for trial by the war crimes tribunal at the Hague, have their own rump republic.

But the federal structures are weak, and the parallel legal systems and tax and customs structures leave loopholes for smugglers to slip through.

And the criminal gangs on all sides which came to power during the fighting have powerful friends in government which further help them evade duties.

Looking ahead

The hope, according to Mr Ashdown, is that his commission will complete its task by the start of 2005.

If local leaders fail to carry through the proposed reforms, Mr Ashdown's office has the power to impose them.

The aim is to prepare Bosnia for a genuine common market, as a first step towards the eventual EU membership which Bosnia has as a long-term target.