Montenegro is embracing a new direction! The government has introduced an innovative fiscal strategy aimed at accelerating economic growth and enhancing the quality of life for its citizens. This is not a mere policy adjustment but a comprehensive approach designed to ease burdens on both employees and employers while promoting a fairer economic environment. The implementation is slated for October 2024, contingent upon the final adoption of all proposed changes.
Reduced Burden for Workers and Strengthened Businesses
Payroll Enhancements: A key element of the strategy is a significant reduction in social security contributions. Employee contributions for pension and disability insurance will decrease from 15% to 10%. Furthermore, employer contributions are being completely eliminated! This will directly increase the net income of employees, providing them with more disposable income to enhance their living standards. For businesses, the reduction in operational costs will allow for more investment in their workforce and growth plans. This dual benefit is anticipated to create a ripple effect, promoting job creation and stimulating economic growth.
Substantial Minimum Wage Increase: The government is also making a strong move to support low-income earners with a notable rise in the minimum wage. The new policy introduces a tiered system, with an average wage of €700, and higher for those with advanced educational qualifications, reaching €800 for university graduates. This policy not only improves the living standards of low-income workers but also addresses income inequality. By ensuring broad-based benefits from economic growth, the government is fostering a more robust and inclusive economy.
Tax Reforms for a Fairer System
The fiscal strategy also includes significant tax adjustments:
Excise Duty Simplification: Excise duties on “still wines” will be restructured to align with the rates for carbonated and non-carbonated water with added sugar, creating a fairer and more streamlined tax system across different alcoholic beverages.
Expanded Tax Base: The government proposes increasing the VAT from 7% to 15% on various goods and services, including books, accommodation, catering services (excluding specific drinks), and certain cultural and sports activities. While this may lead to a slight increase in consumer prices, it aims to expand the tax base and generate additional revenue for the state. This additional revenue will be crucial for maintaining the long-term sustainability of public services and infrastructure.
Conclusion
Montenegro’s new fiscal strategy offers a refreshing change for the economy. It recognizes the interconnected roles of employees, businesses, and the wider economic framework. By enacting these reforms, the government is setting the stage for a more dynamic and inclusive economy, where sustained growth and improved social well-being are shared by all.
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