VAT and excise duty collection fell by 14 percent in March: Worrying data from the report on the execution of the state budget

In March, the state budget generated 244,5 million euros, which is 18,5 million euros more than planned. This was achieved thanks to the fact that 71,2 million euros were collected from corporate income tax, which is 30 million more than the plan, it was stated in the report on the execution of the budget of the Ministry of Finance.

However, what is worrying is that the collection of VAT and excise duty is 14 percent less than the plan, or a total of 16,4 million euros. The collection of these two duties, which on an annual level make up about 60 percent of the total state revenues, in March was lower by about three million euros compared to the same month last year.

Collection fell, and VAT and excise taxes increased

Most of the available data indicates that the collection of these two duties must have been significantly higher than in the same period last year, because excise taxes on cigarettes, sweets and juices with sweeteners have been increased since the New Year, and VAT has been increased from 7 to 21 percent on part of the catering services. . Also, inflation should have contributed to the growth of VAT collection, because according to Monstat, prices in March were 5,5 percent higher than in the same month last year, as well as the increase in wages in part of the public sector. March was also the second month after the minimum pensions for over 40 beneficiaries were significantly increased, which should have increased consumption and thus the collection of taxes, especially VAT.

What could have had a negative impact on the collection of VAT and excise duty was a slightly lower number of tourists in March, who had 11 percent fewer overnight stays compared to the same month last year. However, both in January and February, Montenegro had a smaller number of tourists, but the collection of VAT and excise taxes increased compared to the same period last year.

The lower collection could have been influenced by a decrease in the number of foreigners with registered residence or a decrease in their spending, but there is no official data for this analysis.

In the explanation of the Ministry, they did not deal in detail with the decline in VAT and excise duty collection in March.

"The dynamics of the collection of value added tax revenue in the net amount is affected by the dynamics of VAT refunds, which have been accelerated by the Tax Administration since the beginning of the year, taking into account the accumulated amounts of requests for refunds from the previous period", stated in the explanation of the report.

This would mean that the Ministry of Finance reported the gross collection of VAT in the reports in previous months, as well as that for months it did not reimburse taxpayers the part of this tax to which they were legally entitled. The Ministry did not announce the amount of returned VAT and how it could affect the reduction of net collection of 14 percent.

The situation in March was saved by the increase in tax collection on profits made in 2023. However, this tax is mostly paid in this month, when the business report for the previous year is submitted, as well as partially in April. In the other months, the collection of this duty is in symbolic amounts, so this tax could not cover the fall in the collection of VAT and excise taxes in the following months, if it were to continue.

The total collection of all revenues in March amounted to 244,5 million, while current expenses amounted to 231,1 million, so a surplus of 13,4 million euros was realized. However, in this March, the old debt of 59,8 million euros came due, so the total lack of money amounted to 48,7 million euros. That deficit in March was covered by a decrease in deposits of 691,9 million to 644,2 million. These deposits were secured by the government's debt of 687 million euros at the beginning of March.

“Fidelity”: Camouflaged the data

The consulting company "Fidelity consulting" announced that "the PR team of the Ministry of Finance made an effort to solidly camouflage the March data on budget revenues", and that they kept silent about the key thing - the drop in VAT and excise taxes.

“Why does this matter? Revenues from VAT and excise duty make up almost 60% of budget revenues; any, let alone a 14% drop compared to the plan, indicates the weakness of the economic policy based on the consumption of foreign citizens", the company announced.

They also said that spending and filling the budget are decreasing, while promises to increase salaries by 25% and minimum pensions to 600 euros continue.

45,9 million have been collected from PIO contributions, 61 million are needed for pensions

Revenues of the state treasury in March from contributions for pension and disability insurance amounted to 45,9 million euros, which is 4,3 million more than planned. This income accounted for 18,7 percent of the total state income in this month.

61 million was needed for the payment of all pensions in March, that is, 15,1 million euros were subsidized to the PIO Fund from other state revenues for the payment of pensions.

In recent months, the Government has announced the partial or complete abolition of salary contributions in order for "employees to manage their gross salary" and the future amount of their pension. They also announced earlier that the average net salary by the end of the year will be 1.000, instead of the current 820, and that difference is as important as the contributions to the pension insurance. In early May, the IMF warned Montenegro that the recent improvement in its fiscal position could be threatened if election promises to significantly increase net wages by partially or completely eliminating pension contributions are implemented.