The tax debt in Montenegro has escalated to approximately €750 million, highlighting a significant gap between the Tax Administration’s effective revenue collection and its struggles to recover long-standing liabilities from companies, municipalities, public institutions, and insolvent taxpayers. This figure marks an increase from €655 million reported at the start of 2025 and €633.1 million noted in mid-2024.
This rise does not indicate a sudden loss of current revenue but includes additional interest, completed inspections, and the formal acknowledgment of previously undeclared or miscalculated tax obligations. Nonetheless, the trend suggests an expanding tax-debt portfolio despite various rescheduling programs and stronger enforcement measures.
Sava Laketić, director of Montenegro’s Tax Administration, noted that approximately €300 million of the total debt is accrued interest, with the principal amount around €450 million. The interest component now constitutes about 40 percent of the entire tax debt.
This distinction between principal and interest is crucial for understanding fiscal risks. The principal represents uncollected revenue that should have contributed to the budget, while accrued interest penalizes delayed payments. When interest becomes a substantial portion of the debt, it complicates repayment for companies already struggling to meet principal obligations.
The daily interest rate on outstanding tax liabilities in Montenegro is set at 0.03 percent, translating to an annualized rate of approximately 10.95 percent. Consequently, an unpaid obligation of €1 million can accrue nearly €110,000 in interest within a year.
This interest mechanism exacerbates the nominal value of state receivables, often outpacing authorities’ ability to assess recoverable claims accurately. As a result, the reported figures may overstate potential budget collections, especially when debtors are inactive or bankrupt.
<pAccording to official records, Montenegro's 200 largest active tax debtors owe over €95 million, while another 100 bankrupt taxpayers account for approximately €130 million. Together, these groups represent about €225 million, or roughly 30 percent, of the total tax-debt portfolio.
The remaining €525 million is widely distributed among various taxpayers, including businesses and local governments. Addressing this fragmented debt requires comprehensive strategies beyond targeting a few high-profile cases, necessitating detailed classifications and reliable property information.
The total tax arrears are significant relative to Montenegro’s economy, equating to about 8.5–9 percent of GDP. They are nearly 2.7 times the projected budget deficit of €278 million for 2026.
The interest component alone exceeds the government’s anticipated annual deficit. Although tax arrears do not directly equate to budget financing due to their non-collectible nature, recovering even a fraction of viable claims could alleviate borrowing needs and enhance fiscal stability.
Mediterranean tax collection has improved in recent years; however, the ongoing growth in accumulated arrears raises questions about sustainability. Current taxpayers may be fulfilling obligations more reliably while historical debts continue accruing interest due to unresolved claims.
An increase in inspections has also led to more discovered liabilities that were previously unaccounted for within the system. While this may inflate short-term arrear figures, it can ultimately enhance tax administration efficiency by revealing older obligations.
The Tax Administration has employed rescheduling as a temporary solution for managing debts. Currently, it oversees four separate programs established in 2015, 2018, 2022, and 2025, with varying success rates.
The program initiated under the 2018 Regulation on Deferred Payment of Tax Liabilities achieved a collection rate of 96 percent, indicating that rescheduling can be effective when conditions are met. In contrast, the 2022 program‘s results were less favorable; only slightly more than 60 percent of obligations were fulfilled.
This discrepancy highlights potential issues with taxpayer expectations regarding rescheduling opportunities and compliance incentives. While rescheduling can support operational companies, it may also encourage non-compliance among those unable or unwilling to pay their debts.
This issue has been particularly evident among municipalities and publicly owned entities that have struggled to maintain timely payments on current taxes despite servicing old debts. A new program was introduced to consolidate both existing liabilities and newly accrued taxes within local governments.
The latest arrangement covers 55 rescheduling decisions, amounting to €54.5 million in principal and €21.5 million in accrued interest. At the time of assessment, two instalments had been paid under this new schedule.
This approach aims to stabilize local finances but potentially defers collection risks into the future. The effectiveness will depend on whether municipalities can manage current obligations alongside historical debts.
The state faces challenges in determining which portions of the €750 million are genuinely uncollectible due to factors such as expired legal limitations or liquidation processes yielding no recoverable assets.
The pace at which regional Tax Administration units terminate claims based on statutory limitations has been criticized as inadequate. Complications arise from bankruptcy proceedings that affect recovery timelines based on asset quality and claim priority.
The state continues reporting receivables that may lack economic viability until these cases are resolved, complicating transparency surrounding the tax-debt portfolio. A gross claim figure provides limited insight compared to a classified portfolio detailing expected recovery timelines and viability assessments.
The Integrated Revenue Management System (IRMS), aimed at improving taxpayer record management and enforcement efficiency, has processed around 180,000 cases. This system’s effectiveness will ultimately depend on its ability to identify emerging arrears early and improve enforcement strategies.
The Tax Administration’s enforcement includes measures such as account blocking and asset execution while enhancing data exchange across institutions for better debtor identification. Quick action is essential since recovery rates decline sharply once businesses enter insolvency proceedings.
The first part of 2026 saw intensified inspections resulting in numerous criminal liability assessments submitted by the Tax Administration to law enforcement agencies regarding suspected tax evasion valued at approximately €1.7 million.
Sectors like construction and hospitality displayed higher instances of irregularities due to their complex business structures that often facilitate undeclared income and unpaid contributions.
The legal profession remains under scrutiny as part of fiscal compliance efforts; fines for non-compliance within this sector range from €2,000 to €12,000.
The implications of these arrears extend beyond immediate collection concerns as Montenegro faces an upcoming period characterized by infrastructure investments and social commitments amidst EU accession preparations. The projected budget deficit for 2026 stands at 3.2 percent of GDP.
A rising stock of unpaid obligations reflects poorly on institutional capacity and raises concerns regarding payment discipline across sectors. For banks, extensive overdue taxes may signal hidden financial stress not evident in traditional non-performing loan metrics.
The Tax Administration’s focus must shift from merely reducing headline figures through accounting adjustments to establishing clear economic valuations for its receivables while enforcing viable claims against uncollectible balances transparently.
The growing tax debt in Montenegro underscores a pressing fiscal challenge that requires careful management of both recoverability and compliance moving forward.
