Why bringing the tax rate back to 9 % can 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 revenue — it would be good to propose a reconsideration of tax rates.
Increasing the income tax rate from 9 % to 15 % — which took effect the year before last for many natural persons earning higher incomes, especially for accommodation providers — could paradoxically lead to a reduction in total state tax revenues.
The dilemma: a broader base or a high rate?
The strategy should be carefully assessed:
- Broadening the tax base (number of taxpayers paying tax), or
- A high tax rate and a smaller number of taxpayers
Research has shown that for small economies such as Montenegro, a better strategy is lower tax rates and greater tax discipline.
Why high rates demotivate
I believe that high tax rates demotivate people to pay tax. Consequences:
- Need for more controls
- Greater engagement of judicial and similar institutions
- Greater risk of corruption
- All that negatively affects the overall economic environment
Increasing taxes can discourage business activity and encourage tax avoidance — especially among local accommodation providers and other natural persons.
How bringing the rate back to 9 % can have far-reaching positive effects
Support for local providers
Let’s give accommodation providers a chance to breathe easier with a lower tax rate. That will enable them to remain competitive and bring their business to a higher level.
Attracting foreign investment
Let’s make Montenegro a magnet for foreign investment — this is good for all of us. A favourable tax policy is crucial for attracting capital that will strengthen infrastructure and create new jobs.
Stimulating economic activity
Reducing the tax to 9 % can stimulate a greater volume of business. More legal and registered transactions:
- Increase tax revenues
- Boost economic activity
- Create a better economic climate
Long-term economic growth
A more stable and attractive tax system places Montenegro on the map as a top destination for international business initiatives — which ensures long-term prosperity.
Conclusion
Imagine Montenegro as a leading destination for investors and tourism. This is not just a dream — because bringing the tax rate back to 9 % is not only a matter of helping local entrepreneurs, but a strategic decision that can improve the entire 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.
