Business leaders at a session of the Chamber of Economy’s Tourism and Hospitality Association Committee voiced concerns over proposed increases in value-added tax (VAT) rates within the hospitality sector. They argued that such hikes would diminish competitiveness, spur inflation, and fuel the shadow economy, emphasizing that there is no real need for such measures from the government’s perspective.
In response, representatives from the Ministry of Finance outlined plans to unify the VAT rate across all hospitality establishments, considering a rate lower than the current 21 percent. Miloš Radulović from the Tax and Customs Directorate announced that by year-end, legislative proposals would aim to create a more equitable tax environment for the entire sector.
Acknowledging these concerns, Radulović assured the formation of a dedicated working group to address industry-specific tax laws, with business representatives invited to participate to ensure balanced solutions.
Committee President Ranko Jovović highlighted existing disparities in VAT application, pointing out that since the beginning of the year, restaurants and catering facilities benefit from a reduced 7 percent VAT rate for food and beverage services, while hotels, which are required to have restaurants, are subject to the higher 21 percent rate. This, he argued, places hotels at a competitive disadvantage and could lead to reclassification of accommodations to avoid tax burdens.
Jovović further cautioned that while initial fiscal gains were observed after the VAT rate adjustments earlier this year, such benefits would diminish over time. He cited examples from other countries where higher VAT rates led to increased tax evasion and informal economic activities, particularly within the hospitality sector.
To safeguard Montenegro’s tourism competitiveness and align with the Tourism Development Strategy, Jovović proposed maintaining the 7 percent VAT rate for accommodation services and extending a reduced VAT rate to all hospitality services.
Svetlana Šljivančanin, from the Ministry of Tourism, emphasized the strategic goals to enhance both the quantity and quality of hotel capacities, noting plans to increase capacity by 3 percent, with a focus on northern regions and upgrades of existing hotels. She underscored the need for uniform VAT rates across all hospitality sectors to prevent misclassification of establishments seeking tax advantages.
Addressing the concerns raised, Andrija Pešić from Montenegro Stars Hotel Group cautioned against tax policies that incentivize businesses to operate outside legal frameworks. He stressed the importance of supporting legally compliant businesses to ensure sustainable revenue collection for the state.
In conclusion, while the Ministry of Finance acknowledged the need for tax reforms, they emphasized ongoing considerations for a unified VAT rate structure across all hospitality services. The existing reduced 7 percent VAT rate introduced in 2020 has been crucial in maintaining regional competitiveness, but its future implementation remains under review.
