It is expected that the amendments will be in place as of July 1 2013.
Despite the opposing political parties, the Labour Union and the civil sector, all raising strong concerns that an increase in VAT will have a large negative impact on citizens and on business development in Montenegro, the coalition of ruling parties voted for the changes.
With this VAT rate increase, the government expects to collect an additional €40 million ($52.5 million) of revenue.
Within the same law changes package, an amendment that regulates the use of the additional revenue was adopted. Under this amendment, 70% of collected revenue will be used for development programmes of Northern Montenegro, which is recognised as the most underdeveloped part of the country.
Reduced VAT rate (7%) remains the same. Under current VAT legislation, the reduced VAT rate of 7% applies to basic goods for human consumption (bread, milk, flour, dairy products, infant foods, grease, oil, meat and sugar), medical drugs, books, teaching materials, accommodation services in hotels, motels and hostels, water, daily news and public communal services.
Even with the increased VAT rate, Montenegro maintains the lowest rate among other countries in the region (Slovenia 20%, Croatia 25%, Serbia 20%, Bulgaria 20%, Greece 23%, Italy 21%, Hungary 27%, Romania 24%).
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