The Ministry of Finance and Social Welfare will not give up its intention to increase excise duties on tobacco, alcoholic beverages, carbonated beverages and sweets from July 1, even though the entire business community insists on it.
Finance Minister Milojko Spajić pointed out that the new excise policy, which is part of this year's budget proposal, was planned for harmonization with European integration and that the state cannot be selective in this matter, that is, that it fulfills some obligations and not others.
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The additional gray market of cigarettes will grow
"We are now making decisions that are in favor of our accelerated membership in the EU. We have been in the membership waiting room for eight years, we don't have time to wait and we have to implement all measures. We cannot be selective," Spajić pointed out at the Committee for Economy, Finance and Budget, which will continue the two-day discussion on the budget proposal for 2021 today.
The deadline for full harmonization with the EU excise policy is the day of Montenegro's accession to the EU.
The first part of the session yesterday was devoted to the presentation of views on the budget proposal for this year by representatives of business associations (Chamber of Commerce, Employers' Union, American Chamber of Commerce, Montenegro Business Alliance), Association of Managers, NGO sector, trade unions, State Audit Institution (DRI) and Central bank (CBCG), and the excise policy of the new Government marked the session.
Due to the new excise policy, the prices of a pack of cigarettes could be higher by 1 to 30 cents from July 50, a liter of carbonated drinks by 12 cents, a kilo of candy by 72 cents, and alcoholic beverages by 7 to 15 cents, depending on the type and percentage of alcohol. .
Privreda asks Spajić to temporarily abandon the planned excise policy and to reach sustainable solutions through dialogue until the adoption of the budget for 2022.
The opinion of businessmen is that the new excise policy will lead to the growth of the gray economy, especially when it comes to the sale of cigarettes, for which Montenegro is recognized as one of the countries with the largest illegal sales, and that the projected revenues in the budget from the excise policy will not be realized, but that the 2018 scenario will happen.
Then, due to the new excise policy, the Government had a big drop in budget revenue, after which it corrected excise taxes again.
Businessmen criticized Spajić for not consulting them before making a decision on new excise taxes.
The minister did not comment on the possibility of the 2018 scenario happening.
23 percent drop in tobacco excise revenue
Businessmen announced that for the first three months of this year, revenues from excise taxes on tobacco were 23 percent lower than planned, which is an additional signal for concern.
PKCG Vice President Nina Drakić pointed out that there was a lack of dialogue between the Government and the business community when it comes to tax laws.
"First of all, I am thinking of the excise policy. Planned excise taxes on tobacco will increase prices by 50 to 60 percent, and compared to Serbia alone, prices will be higher by about 25 percent. "With all the good will of the inspection authorities, I'm not sure that the gray market will be suppressed," said Drakić.
The American Chamber of Commerce (ACC) called to abandon filling this year's budget with a new excise policy, to immediately open a dialogue and to reach sustainable solutions for the budget in 2022.
"In the domain of excise taxes, we have short-term and long-term negative effects. In the short term, the planned annual income of 30 million will not be provided, and that is clear to everyone. It can only provide a bigger loss to the budget. In the long term, foreign investments are important for Montenegro, and you can imagine what kind of message we are sending that the economy will be burdened additionally in the crisis", said the president of APK Nikola Tripković.
UPCG recalled the scenario from 2017 and 2018, when the fiscal consolidation plan predicted a 30 percent increase in excise taxes, while in reality there was a 25 percent drop.
"Then we warned about what would happen, and an identical situation is possible now. The proposal is to stop, to reduce the black market to a minimum. The assessment of the tobacco industry is that if up to 16 percent of the gray market were to enter the legal flows, we can replace this income that is planned in the budget through the announced increase in excise taxes", said the General Secretary of the UPCG Suzana Radulović.
Three years ago, the government at that time increased excise taxes on tobacco three times in a short period of time, which affected the price of packs by about one euro.
All this had an effect on the flourishing of the gray market, which, according to official data, soon halved the legal turnover of tobacco products, and on this basis reduced state revenues by a third.
Spajić also explained that excise taxes are targeted for things "that create negative externalities for society", and that the health budget must be filled with something.
Budget reserve on the Government website
"This is a small start to address the deficit of the Health Insurance Fund," the minister pointed out.
From the increase in excise taxes on tobacco, the Government expects an income of 16,8 million euros, which, as stated, would be invested in the improvement of public health.
Total budget receipts together with deposits are projected at 2,446 billion euros, of which receipts are two billion.
Original revenues are planned at 1,87 billion, and expenditures at two billion.
The budget deficit is projected at 139 million, the capital budget at 203 million, the current budget reserve at around 75 million, while the missing funds are projected at 575 million.
Ines Mrdović from the NGO Action for Social Justice asked Spajić to explain why the budget reserve was projected at 75 million, as well as whether the cabinet of the Government approves money for treatment and what is the amount in these five months.
Spajić said that he thinks that the budget reserve should have been bigger, and he announced that soon all the data about it will be available on the Government's website because they have committed themselves that the money will be spent transparently.
"Of this sum, 40 million is for combating the consequences of the covid crisis, and 26 million for 'To Montenegro'," said Spajić.
The Minister of Economic Development, Jakov Milatović, announced that the Directorate for Social Justice will be formed, which will receive all requests for the allocation of social assistance, which will be analyzed together with other institutions before the money is allocated.
"The plan is for that directorate to be within the Ministry of Finance. We had a situation in the previous government where 900.000 euros were allocated as this type of aid in just one day. That won't happen anymore," said Milatović.
Spajić announced a meeting with representatives of all veterans' organizations in order to reach a solution regarding the fact that everyone receives the same amount of money from the budget, which is not the case now.
Marko Sošić from the NGO Institut Alternativa called for the legal loopholes related to the lack of budget transparency to be resolved, for the issue of temporary financing to be regulated, and for the economy committee to be more actively involved in the drafting of the budget.
Municipalities are dissatisfied because their projects are not in the budget proposal
The President of the Management Board of the Union of Municipalities (ZO) Dušan Raičević pointed out that the budget proposal does not have a development component, without which there is no further economic progress.
He said that the Ministry of Finance ignored the appeal of the Supervisory Board for a meeting to resolve certain issues.
"The unique position of the ZO is that it is necessary to look at certain projects delegated by the municipalities, which did not find their place in the budget," Raičević pointed out.
SAI and CBCG have doubts about the realization of the budget
The President of the Senate of DRI Milan Dabović said that the risk to the budget is that he planned to have no new borrowing, and that there is a possibility that it will happen. He explained this position by the fact that the effects of the application of a set of laws that are an integral part of the budget are called into question.
"There is a risk of the technical possibility of applying these laws", pointed out Dabović.
According to him, SAI supports the concept of switching to program budgeting, which is a step forward, but questions what its effects will be this year, bearing in mind that temporary financing has been implemented for five months already.
The representative of the CBCG, Marijana Mitrović Mijatović, pointed out that it is possible that the budget deficit may be larger due to the uncertainty caused by the coronavirus pandemic, and that it is possible that the projections in the budget may not be realized.
"The new measures may have a negative impact on the business environment. First of all, a change in the excise policy, which can lead to an increase in prices and threaten tourism competitiveness," said Mijatović.
The CBCG also doubts that electronic fiscalization will produce the expected results, that debt management strategies are needed and caution is needed when issuing new guarantees.
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