The reduction of duties at the state and local level should be continued in order to relieve the economy and increase wages. The minimum wage should be gradually increased. Businessmen should be exempted from tax on the profit they reinvest. Amendments to the laws on business companies, labor and public procurement are needed. Encourage young people to stay in Montenegro. The shadow economy is still a big problem, the president of the Chamber of Commerce Vlastimir Golubović said in an interview for "Vijesti".
After a long time since July, employers' taxes on wages have been reduced by two percent? Do you think that is enough and are there large burdens on the economy in Montenegro through various taxes, surcharges, fees... from the state and local level? Are there opportunities to reduce them?
In order to relieve the economy and improve the overall business environment, the Chamber of Commerce of Montenegro continuously monitors and analyzes regulations from the aspect of their impact on business, and initiates changes in order to create favorable conditions for dynamic economic growth.
As part of the Business Analysis 2018, which was prepared by the Chamber's Expert Service, and which was discussed with the highest representatives of the Government, it was concluded that labor costs represent a significant burden on the business of business entities. In this regard, we sent an initiative to decision-makers to reduce contributions to wages, and to increase the minimum labor price. This resulted in an increase in the minimum wage to 222 euros and a reduction in health insurance contributions by 2 percentage points.
Also, businessmen have repeatedly pointed to the fact that numerous taxes and fees at the state and local level represent a limitation to business. In this regard, we initiated the adoption of the new Law on Administrative Fees, which abolished 49 and reduced 72 of the total number of fees. The Law on Local Utility Taxes reduced the number of bases for the introduction of taxes and established their maximum amounts, which will make it impossible for local governments to increase these types of levies beyond the established limit and thereby increase business costs. In addition to the above, the Chamber initiated changes to the Law on Tourist Organizations, which changed the method of calculation of contributions, and they will be determined depending on the business results achieved in the previous year, and not on the basis of realized income, as was the case until now.
The Chamber of Commerce of Montenegro welcomes all these changes and the willingness of decision makers to meet our demands. Certainly, we believe that activities should be continued in the direction of relieving business burdens, reducing labor costs, while at the same time expanding the tax base, which will contribute to the improvement of the overall business environment. Also, it is necessary to continue activities on the improvement of system regulations, first of all, the Law on Business Companies, the Law on Labor, as well as the Law on Public Procurement.
52 thousand employees work in the public administration, we have 130 thousand pensioners and about 40 thousand beneficiaries of various social benefits, while there are about 15 thousand employers with about 120 thousand workers in the economy who regularly pay taxes and contributions. In your opinion, is it a sustainable system?
The Government of Montenegro, as the creator of economic policy, implements measures and activities that contribute to the functioning of the entire system and its sustainability. In this regard, we are witnessing positive trends in the labor market, which is a consequence of the growth of economic activity and increased demand for labor. In the first six months of 2019, employment was 8,9% higher compared to the same period of the previous year. The unemployment rate continues to show a decreasing trend, so that at the beginning of August it was 14,9%, while in the same period of the previous year it was 17,9%. In addition to the above, in order to reduce unemployment, the Government of Montenegro is making intensive efforts to create conditions for the creation of new jobs in the private sector, to which, among other things, sectoral reforms in agriculture, tourism and information and communication technologies contribute.
Proactive state policy is aimed at supporting the improvement of productivity and competitiveness of Montenegrin companies on the global market, adoption of new technologies, improvement of innovation support mechanisms, promotion of entrepreneurship, development of new products and services for export, as well as facilitating access to financing. Also, improving social policy and labor policy, as well as strengthening the efficiency of the education sector significantly contribute to the development of the private sector.
The reform of the public sector through the optimization of the number of employees must be seen in the context of improving the efficiency of administration while respecting the principle of financial sustainability. It is a long-term process, the results of which we can expect in the coming period.
When it comes to business operations, I would like to mention that in the previous year, according to the data from the submitted financial statements, there were 21.989 economic entities operating in Montenegro that employed 124.966 workers.
How much of a problem is the departure of young workers abroad for businessmen and what can be done about it? Which branches of the economy are threatened by this?
The lack of qualified labor is a problem faced by all the economies of the region, and providing it in accordance with the needs of the market is one of the basic prerequisites for accelerated economic growth. In recent decades, due to the transformation of the economy, the growth of the service and trade sectors in the overall economy has been dominant, so it is necessary that the labor market and the education system follow these changes. In overcoming this challenge, the importance of the dual education system, which establishes better connections between the economy and the labor market, should be noted.
The Chamber of Commerce is one of the initiators of the introduction of the dual system of education in Montenegro. In the previous two school years, 591 students were enrolled, who will attend 26 educational programs within 19 schools. 285 employers are involved in this process. In order to encourage students to enroll in educational programs, which the labor market recognized as deficient, 300 scholarships were awarded this school year, 30 of which were provided by the Chamber of Commerce of Montenegro.
The Government encourages the creation of new jobs, i.e. increasing the competitiveness of the economy, through the implementation of the Regulation on the allocation of funds to encourage direct investments and improve the competitiveness of the economy. In addition, it is necessary to intensify the work with employers in order to better inform, motivate and animate them to employ domestic labor using the benefits established by the project "Let's employ our youth in seasonal jobs", as well as those prescribed by the Regulation on subsidies for the employment of certain categories of unemployed persons.
Also, the Employment Agency of Montenegro implements measures of active employment policy, such as education and professional training, loans for self-employment, and professional rehabilitation and grants for employment of persons with disabilities.
The formation of a Student Cooperative, through which employers would hire students and pay taxes on their earnings, could contribute to solving the problem of labor shortage, especially in tourism. It is necessary to consider the possibility of amending the Labor Law with the aim of introducing the category of so-called "permanent seasonal workers". In this way, unemployed persons would be motivated to retrain and have secure permanent seasonal employment. In Croatia, permanent seasonal workers work for the employer for at least 6 months, and for the other months they are paid 60% of the gross salary, three months by the employer and three months by the Employment Agency.
The Union of Employers in BiH did an analysis, one of the conclusions of which is that young people would not leave if they had a salary of at least 500-600 euros, a stable employment contract and a chance to solve the housing issue. Their second conclusion is that they could provide higher wages if their duties were significantly reduced. Is there a similar situation in Montenegro and could this be the way to solve the problem?
Bosnia and Herzegovina, due to its specificity, diversity of economy and socio-economic conditions, can hardly be a parameter - a model with which it should be compared. The situation in Montenegro is significantly different, more favorable, which is confirmed by the continuous growth of the economy, growth in most sectors of economic activity, and positive trends in the labor market - an increase in wages, the number of employees, and a decrease in the unemployment rate.
Overcoming the challenges in the labor market requires further reduction of labor costs, primarily in the part of salary contribution, which will contribute to higher employment, reduction of gray economy and creation of new jobs. I also consider it important to ensure greater flexibility of the labor market through the ease of canceling the employment contract in the event that the worker does not justify the reasons for being employed. Precisely in this way, quality young people will be able to get a job easily and quickly, and to keep it if they demonstrate the competencies and skills needed to perform the job, which is valued by every responsible employer.
What are the positions of the Chamber of Commerce on the increase of the minimum wage now and the announcement of the continuation of its increase? Is this a good way to define this problem for the economy and should the increase in the minimum wage be accompanied by a reduction in taxes or the introduction of a non-taxable part of the wage?
As I already mentioned in the answer to the previous questions, the Chamber of Commerce of Montenegro initiated an increase in the minimum wage and a reduction in labor costs because we believe that in this way we can influence the reduction of the volume of the gray economy, relieve the business of the economy and strengthen competitiveness. The increase of the minimum wage to 222 euros, followed by the simultaneous reduction of health insurance contributions calculated at the expense of employers by two percent, represents a positive move in the direction of suppressing activities in the gray zone and improving the overall business environment.
In the following period, it is necessary to analyze the effects of these measures and work on further increasing the minimum wage and additional reduction of labor costs. Accordingly, we expect a further increase in the minimum wage, which should be accompanied by a reduction in contributions. We believe that, in order to increase production and create new jobs, we should look at the possibility of business entities being exempted from paying taxes on profits that they reinvest in the expansion of production capacity and the improvement of the technological process.
The Chamber of Commerce believes that such changes in tax policy, through finding space for expanding the tax base, can contribute to strengthening the competitiveness of the domestic economy and increasing its potential for growth.
A non-working Sunday is a good decision, traffic will spill over to other days
On the initiative of the Trade Committee of the Chamber of Commerce, a law was adopted which will prohibit work on Sundays and public holidays in trade, with a small number of exceptions, from September. Shopping centers have announced an appeal to the Constitutional Court. Do you think that the adopted legal solution is good and that it will still be successful?
The initiative to introduce a non-working Sunday came from the Board of Trade Associations of the Chamber of Commerce in October of the previous year. With this attitude and conclusions, we turned to the Ministry of Economy, which implemented these requests of businessmen through amendments to the Law on Internal Trade.
The representatives of the trade sector, who initiated the adoption of this decision, presented the arguments that the non-working week will have a significant effect on increasing work productivity, workers will be more satisfied and responsible for work tasks, they will spend and plan more time with their families, employers will develop a much greater social responsibility, the costs of hiring additional labor will be reduced, current maintenance costs and regular service costs (electricity, heating, utilities, etc.) will be reduced.
We are convinced that the income generated on Sundays will spill over to other days.
The gray economy is 25 to 30 percent of GDP and remains the biggest problem
To what extent is the gray economy now a problem for legal businessmen and how to fight against it? Are some assessments of employers correct that no one touches illegal ones, and that registered employers are too often the target of inspections?
The shadow economy is a problem faced by all countries, which negatively affects business conditions, tax discipline and public revenues. The level of the shadow economy is very difficult to measure. In the part of the research that dealt with the issue of informal work, it is highlighted that in the last ten years the rate of informal employment is about a third of the total number of people engaged in work, therefore it is estimated that the gray economy ranges from 25 to 30% of GDP.
The gray economy and unfair competition still remain the biggest obstacles to increasing the level of competitiveness of the domestic economy. The most effective response to the suppression of the gray economy is the improvement of the tax system, which should be based on simple legal solutions. Respecting the principle of predictability of business conditions and consistent application of regulations would significantly contribute to solving this problem, which would have a positive effect on the entire economy.
The negative impact of the gray economy on the economy is mostly manifested through the circulation of products and services in unregistered facilities, work "on the black", receiving part of the earnings "in the hands", illegal work of non-residents and illegal sales via the Internet, i.e. social networks.
Amendments to the Law on Inspection Supervision from 2018 enabled inspectors to control private/residential premises when there are indications that misdemeanors are being committed there, i.e. illegal activities are being carried out, so that the "target" of inspections is no longer only registered business entities. The Chamber of Commerce strongly supports the fight against the gray economy and promotes the legal and responsible business of its members.
In order to reduce the scope of the gray economy, the Government formed the Commission for the fight against the gray economy, in which representatives of the economy participate, as well as operational teams made up of representatives of competent authorities and institutions. In this regard, activities were intensified in the direction of improving regulations and removing ambiguities and doubts in their application, then strengthening the capacity of inspection authorities, as well as reducing informal employment on the labor market.
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