The proposed amendment to the Personal Income Tax Law, which was discussed by MPs today, stipulates that citizens who invest money in bonds issued by the state, the Central Bank or local governments will be exempt from interest tax on that basis.
Europe Now Movement MP Tonći Janović explained on behalf of the proponents that the proposed legal solution stipulates that interest income generated from investments in debt securities, i.e. bonds issued by the state, the Central Bank of Montenegro or local self-government, is not considered capital income.
Until now, a tax of 15 percent was calculated on this type of interest.
"The goal of the proposed legal solution is for citizens who invest money in this form of securities to be exempt from paying interest taxes and to somehow interest them in investing as much as possible in the domestic capital market," said Janović.
On November 3, the state issued domestic bonds worth 50 million euros for Montenegrin citizens for two years, with an annual yield of 3,75 percent.
According to Janović, citizens have already shown great interest in government bonds, stating that after two days the Ministry of Finance subscribed almost nine million euros.
He explained that if someone invests ten thousand euros, after two years they should receive 750 euros, instead of 638 euros when the 15 percent tax is included.
Janović said that this is the safest form of investment and savings, because the payout is safe and guaranteed.
"On the other hand, the state is relying more on the domestic capital market, instead of turning exclusively to international creditors," said Janović.
He said that citizens in Montenegro hold over two billion euros in banks, and the economy between 1,7 billion and 1,8 billion, which means that around four billion euros of domestic money has already been deposited in commercial banks.
"All of this tells us that there is enough money on the domestic market to issue government bonds, from which the state, but also all of us citizens, benefit, because the money stays in Montenegro," said Janović.
He also listed the benefits expected if this legal solution is adopted, including that interest remains in the country, dependence on international creditors is reduced, the domestic capital market and financial literacy are developed, while citizens are offered a safe, simple and profitable way of saving.
"Instead of a small interest rate on bank accounts, you get a fixed interest rate from the state, and if we also exempt that interest from taxes, the yield is much higher," said Janović.
He also assessed that this model makes the public debt structure more stable, because a larger portion of the debt is held by domestic investors, which reduces the risk of shocks and external pressure.
Democratic Party of Socialists (DPS) MP Aleksandra Despotović asked whether the Government is now borrowing from citizens at the level of 50 million euros.
"There is a possibility of risk in the economy and could it happen that inflation is faster than the 3,75 percent offered by the Government? One of the drawbacks is the danger of inflationary movements," Despotović assessed.
She stated that all this comes at a time when it is clear that 500 million euros are missing for the Pension and Disability Insurance Fund (PIO) and 400 million for healthcare.
"Is the government trying to cover the obvious expenditure side in this way?" asked Despotović, adding that the state debt is 4,7 billion.
She asked for what purposes the Government would use that money.
Janović responded that inflation is higher than this interest rate, but if citizens have decided to invest, then it is more profitable for them to invest in bonds because they are not charged an interest rate on that interest.
"The borrowing was given the green light in parliament in December last year, meaning the limit up to which it can borrow was voted on," said Janović.
He stated that, like the previous two years, not a single euro went to salaries, pensions and social benefits, but rather to infrastructure projects and repayment of old debt.
Social Democratic Party (SDP) MP Boris Mugoša said he supports the proposed law, because it stands to reason that if citizens give their money and help the budget maintain stability, it is illogical for the state to take taxes from them.
"However, we should not celebrate the new debt, because the state is borrowing an additional 50 million," Mugoša said.
He stated that the interest rate itself is higher than the banking sector, which he welcomes.
"But I appeal to the state that inflation should not be 4,9 percent, that it should be below three percent, because then citizens will earn from this issue," Mugoša added.
Bosniak Party MP Mirsad Nurković said that he believes that the issuance of government bonds, which will apparently be successful, will be a catalyst for the state to no longer enter international markets in the future, but to try to service its obligations from domestic sources.
He praised the proposed law, because it is something that should reduce the costs for those who invest.
Bonus video:
