Ministry of Finance Press Release on the occasion of the statement issued by the President of Employers Union on anti – crisis package of measures of the Government of Montenegro

The Government of Montenegro has reacted quickly and promptly to the crisis, by passing the package of anti-crisis measures amounting to over 10% of GDP, which significantly higher kind of the support than the one is provided in other countries. The measures of the Government are being undertaken with the objective of preserving the liquidity of the economy and the banking system, which is the foundation of our programme, while all other interventions in the long run can be only counterproductive. The first package of support in 2008, which was issued to the economy related to the reduction in personal income taxes, from 15% to 12% in 2009, reduction of the compulsory social insurance contributions, abolition of fees for the use of construction land, reduction in electricity prices for small and medium - sized sector and most vulnerable categories of citizens, abolition of fees for the use of highways, Project "Job for You", etc. Support to the banking system, was provided through the issuing of guarantees for the credit support from the international financial institutions - European Investment Bank and German Development Bank (KfW), being the first initiative of its kind required by a country. Credit funds were used by a total of 9 Montenegrin banks, for which the state has issued guarantees amounting to EUR122 million. The banking sector and the economy was supported through the prepayment of debt, using of state guarantees, etc., the total amount of the support was above 7% of GDP, which is almost the largest supporting package in the region and the Europe. Furthermore, the Budget Law for 2010, has envisaged issuing of guarantees for to support to the economy in the amount of EUR 140 million. With the objective of improving the business environment and the liquidity of the economy in 2009, amendments to the Corporate Profit Tax were adopted. The obligation to lodge corporate profit tax in the form of monthly installments was abolished, leaving more money for the needs of business entities with the objective of improving liquidity. At the same time, the adoption of the amendments to the Law on personal income tax has provided for the further reduction in the personal income tax from 12% to 9%, equalizing tax rates for prepayment of all sources of income to 9%, representing a significant tax relief for entrepreneurs and those engaged in extra activities. With the objective of avoiding the negative effect of the new tax solutions to the private sector, we have reduced the contributions on behalf of employers, thus reducing their overall contributions (gross and contributions of employer), creating a space for the adjustment in net wage, thus the decrease in wages is being divided between an employer and an employee. Furthermore, the Government, in order to improve the liquidity of municipalities and industry, has established the model based on which the municipalities will be entitled to reconcile their liabilities towards the economy by taking over the tax debt, which as of 1st April 2010, can be lodged in nine monthly installments. The Government in April 2010, has adopted the Decree on deferred payment of corporate profit tax, enabling the taxpayers to service the due dent in six equal monthly installments. Moreover, as a support measure to the economy, we have provided for the deferred payment of the customs debt. With the objective of providing further support to the private sector, the Ministry of Finance has proposed, and the Government has adopted the Decree on requirements for the deferred payment of tax and non-tax liabilities, postponing the payment deadline by six months or in 12 monthly installments. At the same time, the Ministry of Finance is considering to propose to the Government the amendments to the Decree on requirements for deferred payment of tax liabilities in order to further assist the liquidity of companies. By following the best European experience, by activating the Investment Development Fund, a modern mechanism aimed at further improving the liquidity of the economy and starting a business was established. The Government of Montenegro is actively working on improving the business environment and eliminating barriers to business, which is recognized in numerous international reports - World Bank's Ease of Doing Business, report "Cross - border investments in 2010, Freedom House, etc. All the aforementioned is indicating that the Government has recently mitigated the negative consequences of the crisis, providing conditions for long - term sustainability of our economy by implementing various measures, which are similar to anti-crisis package of measures applied in all developed economies.