"Increasing VAT will have long-term negative consequences on tourism"

The increase of VAT for accommodation to 15 percent will have a negative impact on the competitiveness of the Montenegrin tourist destination and in three years may have disastrous consequences for tourism, it was assessed at the session of the Board of the Association of Tourism and Hospitality of the Chamber of Commerce (PKCG).

In the work of the session, which was chaired by the president of the Association Board, Ranko Jovović, in addition to the businessmen, the Minister of Tourism Simonida Kordić, the Vice President of PKCG Nikola Vujović, State Secretaries Petar Drašković and Vuk Žižić, representatives of the National and local tourism organizations took part in the work of the session.

Jovović pointed out that the tourist arrangements for next year have already been contracted with a price that includes VAT at a lower rate of seven percent.

Due to the damage that tourism will suffer as a result of its subsequent increase, he suggested that, on behalf of the Committee, he calls for amendment action in the Assembly, in order to maintain the lower VAT rate of seven percent.

"Businessmen are of the unanimous opinion that the mentioned increase in VAT will have long-term negative consequences for the business of tourism companies, with the explanation that prices in Montenegrin tourism have no room for increase, given that, as they claim, the environment offers more and more for less money" , PKCG announced.

Kordić explained that the amendment action will not bear fruit, because the law prescribing the VAT increase has already been adopted by the Parliament, and then returned for additional consideration by the President of Montenegro, so that mechanism cannot be applied.

She suggested the businessmen to find another solution, recalling that she had expressed her opinion on the Government and asked for the phased application of this law.

According to Kordić, the negative effects of the VAT increase will be compensated to some extent by reducing the burden on employees' wages.

Among other things, she pointed out that the tourism industry is still facing old problems.

"Traffic jams, poor air connectivity, congestion at border crossings, communal hygiene and visa policy challenges - these are issues we cannot ignore. They must be addressed with the utmost seriousness and urgency. We are aware that tourism is not only the job of one ministry, but it is the result of the synergy of several departments, and only with joint efforts can we achieve the results we all desire", said Kordić.

Vujović thanked the relevant ministry for the cooperation so far and pointed out that this umbrella association of the economy will be a reliable partner in solving all challenges.

He said that he hopes that some of the initiatives launched by businessmen will be implemented, as well as that work will be done to find appropriate solutions, and he emphasized the importance of adopting the Law on Permanent Seasonal Workers.

"We can cooperate on a number of issues, especially those that require a strategic solution. I am asking for regular communication and coordination so that we can resolve them in a timely manner. All of us must have the same goal, which is to solve challenges together," said Vujović.

The businessmen also emphasized the importance of the development of airport infrastructure in Podgorica and Tivat, as well as the final decision of the Government regarding airport concessions.

Improving air connectivity with Europe, with the key role of the national airline Air Montenegro, should be a priority, whereby the company must cooperate with the tourism industry to define strategic routes.

Direct air connections with important markets are crucial for the development of tourism, taking into account the transport infrastructure of Montenegro.

During the session, businessmen pointed out that taxes and the fiscal burden represent a big challenge for restaurateurs.

The increase in VAT from seven to 21 percent seriously threatened business, reduced their profitability and competitiveness, which puts them in a worse position compared to regional destinations such as Croatia and Albania.

They also emphasized the problem of the shadow economy and unfair competition, which further complicate the business of serious restaurateurs and hoteliers. While larger hotels regularly pay taxes, smaller establishments often avoid fiscal obligations, which disturbs the market balance.

Businessmen believe that with growing competition in the Mediterranean, where supply is greater than demand, any hasty move, such as tax increases or poor management, can seriously damage Montenegro's reputation as a tourist destination and further complicate the struggle to attract tourists.

They especially pointed out the lack of qualified labor as one of the key problems in tourism.

The businessmen proposed to increase the focus on the education of young people in this sector, in order to solve this issue in the long term.

They said that without the strategic partnership of the state and direct participants in tourism, it is difficult to achieve results, strengthen the environment and raise the quality of the destination.

Therefore, a new Strategy for the development of tourism is necessary, which will include the rapid identification and resolution of key problems, as well as a long-term vision for the improvement of the tourist offer and infrastructure.