Pristina Abolishes Taxes on Goods From Serbia and BiH

As of midnight on April 1, 2020, the Kosovo government’s decision to avolish 100% tax on goods from Serbia and Bosnia and Herzegovina entered into force.

The original idea of the incumbent Prime Minister, Albin Kurti, was to remove the tax on raw materials only and not its complete elimination but due to the US pressure, the decision was changed. Prime Minister Kurti declined to cancel tariffs despite threats that the US aid will be suspended which ultimately led to a no-confidence vote against his government, that was welcomed by the Washington administration.

Finally, Kurti announced that the tax on Serbian goods would be abolished on the basis of reciprocity, while that would not apply to Bosnia and Herzegovina products. “Reciprocity measures are basis for mutual relations between sovereign states which is in line with international law”, Kurti defended his position. He accused Serbia of implementing a number of trade non-tariff barriers since the entry into force of the CEFTA agreement, which seriously harms Kosovo importers and exporters and causes a significant trade deficit for Kosovo.

According to the decision, all phytosanitary and veterinary documents should be controlled at the border with Kosovo. The decision will continue until June 15, when its results will be evaluated.

Following the entry into force of the decision the US Embassy in Kosovo has once again called for the complete and unconditional removal of all 100% tariffs on imports of goods from Serbia and BiH, without creating new barriers. “Kosovo must remove all taxes and not raise new barriers because such a policy damages Kosovo’s people and stifles the economy”, the embassy said in a statement. It added that the US remains opposed to the decision to impose reciprocal measures on the flow of goods from Serbia.

Unlike the US, the European Union welcomes Kurti’s decision, adding that it is important because “regional cooperation is crucial”. EU High Representative for Foreign and Security Policy expressed satisfaction with Kosovo government’s decision. “I am happy to see the decision to fully remove tariffs on goods coming from Serbia and BiH”, said Josep Borrell. Borrell’s greeting was endorsed by EU Neighborhood Policy and Enlargement Commissioner Oliver Varhelyi, who believes that the waiver of tariffs is essential to resuming dialogue between Belgrade and Pristina.

The head of the Serbian government’s office for Kosovo, Marko Djuric, said that in fact Kurti is not abolishing the taxes but only suspending them temporarily and with conditions. Djuric says there is no longer a blockade for trucks traveling from Kosovo to Serbia but appealed to the EC to urgently respond to Pristina’s request for reciprocal measures by Belgrade. Djuric underlined that “wheat trucks for Kosovo’s entire population are waiting at the intersections because Pristina is urging Belgrade to recognize Kosovo’s independence”. Djuric also explained that Serbian police prohibit the movement of trucks during the curfew from 3 pm to 5 am, which applies throughout Serbia to curb the coronavirus epidemic but trucking goods to Kosovo will be excluded from this prohibition.

Serbia’s economy suffers damages worth more than one billion euros a year from trade with Kosovo after 100% tariffs were introduced in 2018 by the then government of Ramush Haradinaj. During the time of the tax penalties on Serbia, the vacuum was filled by companies from the Republic of North Macedonia and Montenegro which were able to expand their exports, preventing a Kosovo market deficit and speculative rise in commodity prices.

Although with temporary effect until June 15 this year, the government of Kurti executed the request from Brussels and Washington, and removed taxes on Serbian goods, resulting in benefits exclusively for the Serbian economy. The tariffs were the main reason for blocking negotiations with Pristina on normalizing relations. It remains to be seen whether Belgrade will make significant steps to resume dialogue by June 15, or whether it will be postponed again with the pretext of the coronavirus epidemic. The political crisis in Kosovo also contributes to further postponement of the negotiations, and in the event of new snap elections in Kosovo, the start of the normalization dialogue is likely to be off by the second half of the year. Until the start of the new dialogue, it would not be realistic to expect other significant steps, both from Belgrade and Pristina.

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