The Montenegrin Ministry of Finance said it is not considering reducing the value-added tax (VAT) rate on fruit, vegetables, and meat, explaining that past experience has shown such a move would not necessarily lower retail prices.
The proposal to cut VAT has been raised several times by the parliamentary committee for economy, finance, and budget, and recently gained support from Deputy Prime Minister and Minister of Economic Development Nik Đeljošaj. However, the Ministry has not given a formal response to the initiative.
Economics professor Maja Baćović from the University of Montenegro said that lowering VAT on basic food items would be more socially than economically motivated. While she noted that tax cuts are generally positive, they also reduce fiscal revenues. According to the government’s fiscal strategy, the plan is to increase, not reduce, VAT on basic food products—from 0% to 7%.
Baćović added that lowering VAT could lead to a temporary price drop, citing Poland’s example in 2022, when cutting VAT on basic food from 5% to 0% reduced inflation by 0.7%. However, she noted that in most cases, price reductions were smaller than expected.
The Ministry of Finance emphasized that the current VAT rate of 7% applies to bread, flour, milk and dairy products, baby food, oil, meat, fish, eggs, and sugar, and was recently extended to menstrual products and baby diapers. The Ministry said previous reductions in VAT rates did not translate into lower retail prices because the benefits were often absorbed by retailers and importers rather than consumers.
The Ministry also noted that small agricultural producers are not VAT payers, so changes to the rate would not affect them. To support farmers, the ministry has already increased lump-sum payments from 5% to 8% and offers tax exemptions for agricultural reinvestment up to €300,000 over three years.
Officials said they continue to monitor market conditions and, together with other institutions, are considering alternative measures to stabilize food prices and strengthen domestic production.
Meanwhile, in Sweden, the government has proposed a temporary cut in VAT on food from 12% to 6% starting in April next year, lasting until the end of 2027, to support households and the economy.
