Montenegro: Pension Contributions Scrapped, Corporate Tax Hiked and Minimum Wage Reaches 1,000 Euros

The Montenegrin government approved last night a package of fiscal draft laws, which the newspaper Vijesti had access to. The package brings radical changes to the tax and contribution system, expected to take effect from January.

The most significant change is the abolition of contributions for pension and disability insurance (PIO). The contributions, which today make up 10 percent of gross salary, will fall to zero — and this amount will be added directly to the net salary employees receive.

On the other hand, the government is removing the middle corporate tax bracket of 12 percent, which applied to amounts from 100,000 to 1.5 million euros. These amounts will now be taxed at the highest rate, of 15 percent.

The package also reduces the percentages redirected to municipalities from personal income tax, real estate tax, motor vehicle tax and gambling fees. Thus, more money will remain in the state budget.

Benefits are also foreseen for salaries and pensions. The minimum wage rises to 1,000 euros for jobs requiring below-secondary education, to 1,250 euros for those with secondary school (grades III and IV) and to 1,400 euros for employees with higher education (grade VI and above). Pensions, meanwhile, will be indexed four times a year, following the growth of salaries and consumer prices.

In its reasoning, the government admits that the abolition of PIO contributions will create a significant budget deficit, but expects to compensate it through the increase in corporate tax and by keeping more revenues in the state coffers. The wage increase will also raise pensions through the indexation formula, while higher wages and pensions will stimulate consumption — bringing more VAT and excise duties to the coffers, which according to the government will fully compensate the loss.

Source: Vijesti