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IMF Recommends Additional Fiscal Consolidation For Montenegro

by Ulrika Lomas, Tax-News.com, Brussels

14 March 2016


The International Monetary Fund (IMF) has recommended a number of fiscal reforms that Montenegro could adopt in order to increase revenue.

Small value-added tax (VAT), tourism tax, and property tax increases could yield immediate gains of about 0.5 percent of gross domestic product (GDP), the IMF said in its 2015 Article IV consultation report for the country. Raising VAT to a uniform rate of 19 percent could yield significantly more revenue, of about 1.5 percent of GDP, it said.

The report added that tax exemptions for "strategic" sectors should be revoked. It also said that the tax base could be broadened by addressing substantial deficiencies in tax administration, such as taxpayer registration, filing and payment enforcement, tax debt management, and taxpayer appeals.

In addition, restoring the crisis tax rate from 11 percent to its original level of 13 percent – still less than the recent rate of 15 percent – would yield gains of about one-third of a percentage point, the Fund said. The crisis tax, which is levied on earnings of over EUR720 (USD793), was introduced in 2013 as a temporary measure to help tackle a growing budget deficit.

TAGS: tax | economics | value added tax (VAT) | property tax | fiscal policy | public sector | gross domestic product (GDP) | budget | International Monetary Fund (IMF) | Montenegro | enforcement | individual income tax

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