News 11 Feb 13

Montenegro Brings in Crisis Tax Rise

Montenegrins whose wages are higher than the country’s average now have to pay more income tax to plug gaps in the state budget.

Milena Milosevic
BIRN
Podgorica

Montenegro on Friday introduced a 6 per cent income tax hike on salaries which are higher than the country's average of 720 euro gross, as the government tries to tackle the country's budget deficit.

Higher earners, who make up a quarter of those with jobs - around 44,000 people - must now pay 15 per cent tax for each euro over the average salary.

Those earning less, around 120,000 people, will still pay nine per cent tax.

“The additional measures of fiscal adjustment are aimed at decreasing the anticipated budget deficit, which is not low,” finance minister Radoje Zugic said in parliament while defending the proposed amendments.

The government had initially planned an across-the-board income tax rise of three per cent on all wages higher than 400 euro gross.

But it decided to compromise after trade unions rallied in front of parliament, saying the plan was unfair to the poor and threatening social unrest if it was adopted.

Unions which were involved in staging demonstrations that shook Montenegro last year insisted that the rich should pay more to solve the country's financial problems.

Since the global economic crisis started to affect Montenegro, the government has introduced a range of measures to preserve economic stability, but its austerity drive has caused public discontent.

Even before the tax hike, the average gross monthly wage was not enough to meet the average family’s needs, according to December 2012 data.

Montenegro’s state statistics bureau says that the minimum that a four-person family needs is 800 euro.

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