Tourist officials and caterers are asking the Government to consider the possibility of introducing a reduced rate of value added tax (VAT) of seven percent on all catering services.
At the joint session of the Board of Tourism and Hospitality and the Group of Caterers of the Chamber of Commerce (PKCG), it was announced that analyzes show that an increase in competitiveness and income can be expected if such a reduced VAT rate is introduced in parallel with electronic fiscalization.
"In this way, a strong recovery, improvement of business and competitiveness of Montenegrin tourism, increase of investments, growth of employment and reduction of gray economy in the catering sector would be affected, all in accordance with the comparative practice of Mediterranean countries from the EU", it was announced at the session.
The PKCG announced that the VAT rate in the catering industry for the preparation and serving of food, drinks and beverages, except for alcoholic and carbonated beverages with added sugar and coffee, has been temporarily reduced to seven percent, in order to support the business of caterers during the pandemic crisis and apply until August 31 of this year, from when it applies only to facilities that provide catering services.
The president of the Catering Group, Igor Vujošević, announced that the lower VAT rate on catering services would be in line with EU directives
"It would bring the business conditions of the Montenegrin hotel industry closer to those in competing, Mediterranean and other European countries, where the average rate ranges from five to ten percent." "From the application of a reduced VAT rate for the preparation and serving of food, drinks and beverages in all hotels, it would be realistic to expect an increase in investment and growth in employment, which was the experience in other countries that lowered that rate," said Vujošević.
In this sense, as he said, perhaps we should talk not about reduced prices, but about more competitive prices and the redirection of money into investments in the hotel sector.
According to Vujošević, for the further development of Montenegrin tourism, it is necessary to look at the possibility of creating the conditions to apply a single reduced VAT rate of seven percent in the catering sector, which would apply to food preparation and catering services, as well as to non-alcoholic beverages. drinks and beverages, wine and beer in catering establishments.
Previous experience shows that the reduced VAT rate on accommodation services and on the preparation and serving of food, beverages and beverages, except for alcoholic beverages, carbonated beverages with added sugar and coffee, did not have a negative impact on budget revenues, but through the increased volume led to higher revenues from VAT.
Also, the advantage of the same VAT rates within the tourism industry is that the calculation is simpler and with fewer errors, and the supervision performed by the tax authority is simpler and more efficient.
"We compare ourselves to Europe and we want Europe now, so then the VAT should be like in European countries, that is, in the countries of the region where tourism has a great impact on the gross domestic product (GDP)," Vujošević believes.
The head of the Tax System and Tax Policy Directorate at the Ministry of Finance and Social Welfare, Jovica Petričević, explained that the decision to return the reduced VAT rate to the general rate of 21 percent is a consequence of the good results achieved in this sector during this year.
"We decided to return the VAT rate due to the successful tourist season and economic recovery. The crisis is here, but the business achieves good results. One of the reasons for returning the VAT rate is the stability of the budget," Petričević said.
He pointed out that the reduced VAT rate was generally not accompanied by a reduction in prices in catering establishments.
"The reduction of the VAT rate to seven percent did not bring any benefit to the end consumer," claims Petričević.
The representative of the Lipska Pećina, Tomo Knežević, supports the requests of his colleagues to lower the VAT rate, at the same time disagreeing with the position of the representative of the Ministry that the tourism economy has recovered.
"We are still talking about the wounded market. Tourism has not recovered, but is only on the way to recovery. We will need another year like this to make it so. We are still in the covid year, when fear is present among guests. If we let the VAT return to 21 percent, we will deal the final blow to tourism," Knežević believes.
He explained that the revenues generated last season mainly cover the debts of business entities from the lost last year.
The chairman of the Board, Ranko Jovović, agreed with that assessment.
"If a whole year is lost in tourism, it is necessary to compensate those costs." "One season can hardly recover tourism from the accumulated losses from last year," said Jovović.
The representative of the Association of Hotels of Montenegro, Boris Marđonović, supported the proposal of his fellow valuers to request a reduction of the mentioned rate.
"Raising the VAT rate, especially on accommodation in this situation, is a big mistake." Such decisions are planned several years in advance. "We expected that the budget would be filled with a larger intervention from the gray zone," said Marđonović.
According to the chief tourist inspector, Svetlana Šljivančanin, it is evident on the ground that some restaurateurs are re-registering in order to maintain a lower VAT rate.
"I would like to point out that in order to protect public health and people's lives, we increased the intensity of inspection supervision and included inspectors from all inspections, not only tourist ones, in the control of compliance with measures in catering facilities. Please take care of compliance with the measures, since we are sealing hospitality facilities that violate them," said Šljivančanin.
During the session, the opinion of businessmen was also heard that it is necessary to control more intensively the issuers of private accommodation, because in that area the state does not have sufficient control over the payment of VAT.
It was concluded that PKCG will send the initiative of the Ministry of Finance and Social Affairs for a meeting with representatives of tourism businessmen on the subject of the announced increase in the VAT rate in the hospitality industry.
Also, the mentioned initiative for the meeting will be sent to the Committee for Economy, Finance and Budget of the Assembly.
Although they were invited, the representatives of the Ministries of Economic Development and Health and the Institute of Public Health did not attend the session, in order to discuss with businessmen the measures for the New Year's Eve.
As the businessmen did not have interlocutors for this item on the agenda at the session itself, it was concluded that a meeting of tourism businessmen with representatives of those two departments and the Institute will be initiated in the Chamber at the beginning of next week.
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