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November 4ethe government of Montenegro announced the Europe now program that defines the strategic objective of Montenegro’s economic policy – to achieve smart, sustainable and inclusive economic growth that will contribute to improving the quality of life of all its citizens.
This ambitious plan aims to increase the standard of living of all citizens, improve the business and investment environment and reduce the gray economy in the world of work. market. Europe now is based on the will of the State to transfer part of the income for the benefit of the employee and the employer; thereby creating an environment conducive to new employment opportunities and broadening the tax base.
Knowing that the quality of life depends on disposable income, that the tax burden on wages in Montenegro is the highest in the region, and that only in Montenegro there is no part not taxable wages, the economic program Europe now proposes the following set of measures, mainly in terms of tax policy:
- Increase in the minimum wage from €250 to €450 in net amount;
- Reduction of costs for employers thanks to a reduction in the tax burden on labour;
- Introduction of progressive taxation as a more efficient taxation model;
- Introduction of the non-taxable part of the salary of €700 on the gross basis (rate
- income tax of 0% on a gross basis up to €700);
- Introduction of an increased income tax rate of 15% on the gross base above €1,000;
- Abolition of the obligation to contribute to compulsory health insurance.
With the proposed changes, the tax burden on salaries is reduced from 39% to 20.4% for the lowest incomes, then gradually increased to a level of 31.3% for the highest net salaries of 2 000 € and more.
The suggested tax reforms should lead to a general increase in salaries in the economy and government agencies.
Europe now is also likely to increase the rate of withholding tax from 9% to 15% and to introduce progressive rates on the profits of legal persons amounting to 9%, 12% and 15%, depending on the amount of the taxable profit instead of the proportional corporation tax rates of 9% which applied until now.
The tax rates on the amount of taxable profit are as follows:
- up to €100,000.00 – 9%;
- from €100,000.01 to €1,500,000.00: €9,000.00 + 12% on the amount over €100,000.01;
- above €1,500,000.01: €177,000.00 + 15% on the amount above €1,500,000.01.
Other measures proposed by Europe now concern the increase in excise duties on tobacco products, alcohol and alcoholic beverages, the introduction of excise duties on sugar, cocoa and ice cream products, and the taxation undeclared income, the taxation of cash withdrawals by legal persons, the implementation of the new law on games of chance and improved control in the field of supervision of inspections.
The highly targeted program Europe now encounters both positive reactions and public criticisms, which relate to the sustainability of such a system and the burden it imposes on employers and the State.
If adopted by the Parliament of Montenegro, the program Europe now will be in place as of January 1, 2022.
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