Petar Odžić, Vice President of the Social Democratic Party (SDP) and European Union representative, has criticized the proposed increases in Value Added Tax (VAT) and excise duties, arguing that they will exacerbate inflation without providing the anticipated financial benefits for the budget.
Odžić stated that raising tax rates typically results in a reduced collection rate, which leads to higher prices for consumers without effectively addressing budget shortfalls.
He noted that Montenegro already has a higher VAT rate than Croatia, an EU member state, and is experiencing much higher inflation. “Prices in Montenegro now exceed those in many European capitals. We must avoid using these taxes to cover up the flaws of populist measures. The recent tourism season demonstrated that raising VAT leads to a sharp increase in prices, reducing our competitiveness and resulting in less revenue for the state,” Odžić explained.
He recommended reverting the VAT rate to 7% for the hospitality sector, which he believes would enhance Montenegro’s competitiveness and lead to better budget performance through improved tourism revenues.
