The Ministry of Culture and Media believes that a balance will be found regarding the rate of VAT on books and press that will enable sustainable financing of public needs without jeopardizing access to key cultural and educational resources.
This was stated by the minister's department Tamara Vujović, to the question of "Vijesti" whether the Ministry of Culture and Media was informed that there will be an increase in the tax on books and the press, as well as whether during the public debate they will propose to maintain the current tax rate of seven percent or to introduce zero the VAT rate on books and press, for which there were earlier proposals.
The draft fiscal strategy is up for public debate until August 7, which, among other things, foresees an increase in the VAT rate from seven to 15 percent on books and daily and periodical press.
In recent days, representatives of the largest publishers of books and print media, as well as associations of writers, librarians and cultural institutions, appealed to the Government to abandon the tax increase. They believe that a rate of 15 percent would mean the cessation of the work of small publishing houses, a reduction in the production of contemporary Montenegrin literature, and that the domestic print media would be brought to the brink of extinction.
"We understand the public's interest in part of the Fiscal Strategy Draft of Montenegro for the period 2024-2027. in which it is announced that the VAT rate on books, daily and periodicals will be increased from the current seven to 15 percent. The draft Strategy is still under public discussion and in the coming days, at meetings with representatives of competent authorities, we will actively deal with this issue, always keeping in mind the best interest of the citizens", the Ministry stated in "Vijesta".
"Satisfy both cultural and financial goals"
They also say that it is important to emphasize that "increasing the VAT rate directly affects the increase in state revenues, and this can be particularly useful for reducing the budget deficit or financing public projects and services."
"Certainly, we do not forget that any increase in the VAT rate can be very complex and requires a detailed analysis and balancing of various factors. Therefore, the increase in the VAT rate on books, daily and periodicals will be carefully considered and in the context of the country's cultural, educational and economic goals. While a higher rate may increase government revenues, we must not ignore the possible negative consequences for information accessibility, education and cultural development. We believe that we will find a balance that will enable sustainable financing of public needs, without jeopardizing access to key cultural and educational resources", the Ministry stated.
However, it is questionable what can be a compromise, because the VAT rate can be 15 percent as suggested by the strategy, seven percent as it is now or zero percent, which publishers have been asking for for years and which is proposed by the European Parliament in its resolution of 14. September 2023 on the future of the European book sector. There are no VAT rates between seven and 15 percent.
In most EU countries, the publication of books and printed media is considered a public interest due to the educational and cultural development of the nation and informing citizens, so there are several incentive measures, including the lowest or zero VAT rates.
Until now, there are three VAT rates in Montenegro of zero, seven and 21 percent, and this document now proposes the introduction of an intermediate rate of 15 percent, which would apply to the part of products and services that are currently subject to a rate of seven percent and lower partly for those for whom the rate is now 21 percent.
Culture and informing the victim of the budget hole
The draft strategy proposes an increase in the VAT tax rate from seven to 15 percent, except for books and press, and on monographic and serial publications, copyrights and services in the fields of education, literature and art, science and art objects, as well as on tickets for cinema and theater shows, concerts, museums, fairs, matches, as well as services for the use of sports facilities for non-profit purposes and service services provided in marinas. The VAT rate will be 15 percent for all accommodation services in hotels, motels, boarding houses,... as well as food and beverage services, except for alcoholic beverages, carbonated and non-carbonated beverages with added sugar and coffee in catering facilities. Until now, the rate for most of these services was seven percent and partially 21 percent.
The draft strategy states that the Government expects a total of 15 million euros in annual income from the increase in the VAT rate from seven to 60 percent, while it is not specified how much more money is expected from the increase in duties on books and printed media.
We believe that we will find a balance that will enable sustainable financing of public needs, without jeopardizing access to key cultural and educational resources, according to the Ministry of Culture and Media
In the explanation, the Government states that the introduction of the medium rate of VAT is proposed in order to "compensate for the reduction in state income based on the reduction of the tax burden on wages, which makes Montenegro one of the most favorable tax systems in terms of taxation of labor costs".
With the same document, the Government plans to reduce contributions to pension insurance from the current 20,5 percent of the gross salary to 10 percent, which would increase employees' earnings by about five percent, and employers would have a 5,5 percent reduction in taxes. This reduction in contributions would mean a decrease in budget revenue, i.e. a "hole in the budget" of around 180 million euros, which is why the government plans to use a series of other measures, one of which is an increase in the VAT rate from seven to 15 percent, to compensate for that loss.
MF: We carefully consider all proposals
The Ministry of Finance (MoF) announced yesterday that it is carefully considering all the proposals that come from the interested public regarding the draft Fiscal Strategy, analyzes them and looks at the possibilities, so that those that prove to be justified during the public discussion, find themselves in the final version.
They said that there is a high degree of openness and dialogue in the preparation phase of the Fiscal Strategy of Montenegro for the period 2024-2027. resulted in a series of constructive proposals and criticisms, which the Ministry of Finance takes into account and considers, among which are criticisms due to the intention to increase taxes on books and the press.
"In relation to the measure related to the introduction of two reduced VAT rates (7% and 15%), according to which a rate of 15% would be applied to books, monographic and serial publications, as well as daily and periodicals, we point out that it is also in accordance with the provisions of EU Directive 2006/112. However, we note that on this basis, in the public hearing, we will consider the modalities of applying the reduced rate and propose the most optimal solution when amending the Law on Value Added Tax, which are planned for the fourth quarter of the current year," the Ministry announced yesterday.
Bonus video:
