In Montenegro, the shadow economy remains a significant challenge, requiring a systemic approach to tackle the issue, according to the Director of the Tax Administration, Sava Laketić. Addressing the problem involves strengthening institutions, promoting digitalization, educating citizens, and creating a stimulating tax environment.
In a podcast episode titled “The Shadow Economy – How to Protect Legal Businesses?” organized by the Union of Employers of Montenegro (UPCG) and supported by the International Labour Organization (ILO), Laketić highlighted the need for collaboration among all societal actors, from the education system to relevant institutions.
He stated that the shadow economy in Montenegro is estimated to range between 20.6% and 31%, with his personal assessment suggesting a higher percentage. While recent data indicates a decrease in the shadow economy, it remains a significant issue that hampers legal businesses. Unregistered businesses create unfair competition, and a substantial number of service providers, especially in sectors like accommodation, construction, and hospitality, remain unregistered.
Laketić emphasized the importance of simplifying tax registration and payment processes, creating a supportive legal framework, and developing a tax culture. He pointed to reforms in labor taxation that have led to positive outcomes, such as more workers transitioning from the shadow economy into the formal sector. The tax administration has achieved a 67% revenue increase in the first quarter of this year compared to last year.
Despite progress, there is a shortage of 60 tax inspectors, with more expected to retire by the end of the year. Laketić outlined digitalization as a key tool in the fight against the shadow economy. Electronic fiscalization, introduced in 2021, allows for remote business monitoring and further enhancements to risk analysis tools.
The Tax Administration is focusing on risk analysis and the implementation of an integrated revenue management system, enabling businesses to be managed digitally, reducing the need for in-person visits to the tax office. Laketić stressed that, without comprehensive reform, the shadow economy cannot be fully eradicated.
Efforts should include improving the business environment, simplifying procedures, and strengthening institutional capacity to achieve real change in Montenegro’s fight against the shadow economy.
