The European Union proposed a law: "The government will have the option to temporarily lower the VAT rate"

The European Union has proposed an act that, they said, would give the government the ability to temporarily lower the value added tax (VAT) rate.

European Union MP Boris Mugoša said at a press conference that the main reason for passing the law was to define the government's ability to react quickly in the event of a significant increase in the prices of products and services on the world market, in order to protect the standard of living of citizens.

"A temporary reduction in the VAT rate on certain products and services could halt or mitigate the rise in prices of fuel and other products on the domestic market. Some EU and regional countries have implemented measures to reduce VAT on fuel, while in previous years some countries also reduced the VAT rate on food in response to the energy crisis. The VAT rate on fuel in our country is higher than in several EU member states, while, for example, the VAT rate on fruit and vegetables is higher than in Croatia, Slovenia, Italy, Cyprus, Greece, etc., as well as in the countries of the region," Mugoša said.

Another reason for passing this law, as Mugoša said, is the fact that the Montenegrin economy is extremely sensitive to external shocks, because it is highly import-dependent, which is why the consequences of the crisis on price increases in Europe "very quickly spill over into price increases on our market."

"The European Central Bank has already adjusted its inflation forecast upwards for 2026, and the fact is that recently inflation in Montenegro has been significantly higher than inflation in the eurozone," Mugoša said.

European Union representative Mirko Stanić assessed that the government has so far not shown an adequate reaction to the "extreme economic crisis that could hit Montenegro and all our citizens."

"Therefore, we will take our share of responsibility towards the state and citizens and, with these and similar measures, try to alleviate the serious challenges we face as a society. Almost all European governments are in constant session to find models for reducing fuel prices or other measures to support the economy and protect citizens' standards. Reducing the VAT rate on fuel is one of those measures that has already been initiated by numerous EU countries, and Spain is the latest in a series to reduce the amount from 21 to 10 percent," Stanić said.

According to him, "after all the increases, we come to a paradox" that the Government "is taking more money per liter of fuel than they were taking before the excise tax reduction."

Stanić believes that this legal proposal by the European Union is socially, but also fiscally responsible, because if the "psychological limit of two euros per liter of fuel is exceeded," it will trigger a "wave of price increases that will lead Montenegro into hyperinflation," which citizens, especially those socially vulnerable, will not be able to withstand.

"In the European Union, we expect this proposal to be supported by all political parties in parliament, regardless of whether they are in power or opposition, because it is aimed at supporting the Montenegrin economy and citizens. In the next ten days, we will go public with new measures aimed at improving our country's economy and supporting citizens," Stanić said.