Montenegro raises VAT to 19 percent

Montenegrin MPs from the ruling coalition on June 18th backed the government's proposal to raise the value added tax (VAT) from 17 to 19 percent.

A total of 42 MPs voted for the VAT increase, whereas 34 MPs from opposition parties were against that proposal.

Finance Minister Radoje Zugic said during a parliamentary discussion that the increase in VAT had been suggested because of the budget deficit, that is, a discrepancy between public revenues and expenditures.

He said that the economic crisis could put the country's liquidity in danger.

VAT increase is a difficult and unpopular but necessary measure aimed at reducing the public debt and establishing a fiscal sustainability and macroeconomic stability, Zugic stressed.

According to him, the Montenegrin government expects this VAT increase to bring between 37 and 40 million euros worth of revenues to the budget.

He pointed out that the VAT rate in Montenegro would remain the lowest in the region, despite the increase.

Civil society groups condemned the move as an attempt to put the burden of repaying the country's debts on the backs of ordinary consumers.

Just before MPs started debating the proposal, a group of civil society organizations, headed by the Network for the Affirmation of the Non-Governmental Sector, MANS, handed in a petition opposing the VAT increase signed by 12,000 people.