Why could returning the tax rate to 9 % transform Montenegro’s tourism and investment landscape?
Based on the concept of the “Laffer curve” — which shows that there is an optimal tax rate that maximises state revenues — it would be good to reconsider tax rates.
The increase in the income tax rate from 9 % to 15 % that took place the year before last — for many natural persons earning higher incomes, and especially for accommodation providers — could paradoxically lead to a reduction in total tax revenues of the state.
A broader tax base or a high rate?
The strategy should be carefully considered:
- Expanding the tax base (the number of taxpayers), or
- A high tax rate and a smaller number of taxpayers
Research has shown that for small economies such as Montenegro the better strategy is lower tax rates and greater tax discipline.
Why high rates demotivate
High tax rates demotivate people from paying tax. Consequences:
- The need for more control
- Greater involvement of institutions of the judiciary and others
- Greater risk of corruption
- Everything that negatively affects the economic environment
Raising taxes can discourage business activities and encourage tax evasion — especially among local accommodation providers and other natural persons.
How returning the rate to 9 % can have far-reaching positive effects
Support for local providers
Let’s give our accommodation providers a chance to breathe more easily with a lower tax rate. This will enable them to remain competitive and raise their business to a higher level.
Attracting foreign investment
Let’s make Montenegro a magnet for foreign investment — which benefits all of us. A favourable tax policy is key to attracting capital that will strengthen infrastructure and create new jobs.
Stimulating economic activity
Reducing tax to 9 % can encourage larger volumes of business. More legal and registered transactions:
- Increase tax revenues
- Generally raise economic activity
- Create a better economic climate
Long-term economic growth
A more stable and attractive tax system positions Montenegro on the map as a top destination for international business initiatives — ensuring long-term prosperity.
Conclusion
Imagine Montenegro as a leading destination for investors and tourism. This is not just a dream.
Returning the tax rate to 9 % is not merely a matter of helping local entrepreneurs — it is a strategic decision that can improve the overall economic picture of our country.
What is your opinion on the impact of the tax rate on economic development and tourism in Montenegro? Contact Finance Plus and share your perspectives.
