Statement by Deputy Prime Minister Momo Koprivica

The fact that the owner of BEMAX is helpless in the face of arguments and a state that has only recently become incorruptible is evident not only because he lacks facts on his side and resorts to cheap political manipulations, but also because his poorly crafted statements are written by those who are well-paid by BEMAX. The irony of history dictates that the very individuals who once skillfully tailored regulations and other rules of the game for them are now the ones preparing their statements.

Apart from issues with truthfulness, the owner of BEMAX also exhibits clear logical inconsistencies. How can one logically justify the claim that I initiated this case in anticipation of the Nikšić elections when I submitted an initiative to the Tax Administration and filed a criminal complaint almost nine months ago, specifically on 17 June 2024?

Regarding retroactivity, there is little need for discussion. First, the Constitution of Montenegro permits the retroactive application of certain legal provisions when required by the public interest, as determined in the legislative process (Article 147, Paragraph 2). This was precisely established through a lawful parliamentary procedure in this case.

Second, this legal solution has not introduced any new tax, levy, obligation, or burden, nor any new tax rate or similar measure. It merely grants tax authorities the power to retrospectively examine contracts within a five-year period (in accordance with statutory tax limitations) to determine whether sales prices were manipulated to evade or reduce tax obligations. This is a standard procedure already applied in cases of real estate, motor vehicles, and aircraft sales—why should owners of company shares be treated any differently?

Third, the jurisprudence of the European Court of Human Rights, composed of top legal authorities rather than lawyers inclined toward tax fraud, holds that "the retroactive application of a tax statute does not represent per se a violation of the right to peaceful enjoyment of property," as stated in the case of M.A. and 34 others v. Finland.

Dear citizens, if you ever hear that someone has sold an apartment in Podgorica for 15 euros per square meter, be assured that this is a tax fraud scheme designed to minimize the tax payable on real estate transactions. While an individual has the right to set any price for their property, they do not have the right to deceive the state. Consequently, the state does not dictate the selling price or the amount to be received from the buyer. However, when calculating the tax on real estate transactions, the tax authority does not rely on the declared price in the contract but rather on the actual market value. This is not an effort to influence property sales but a measure to prevent the state from being defrauded of tax revenue. The same principle now applies by law to the sale of company shares, causing the ownership structure of the mentioned company to fall into despair, resorting to borrowing cheap statements from those who once repaid their donations in a much more imaginative manner than they do today.

An individual is free to donate their property, and the state has no right to interfere in their personal financial decisions. However, the tax authority assesses and applies tax based on the actual market value, just as it would for a sale transaction. Ownership rights and tax obligations are distinct matters—there is no freedom of choice when it comes to paying taxes. Laws must be obeyed, even if some have been accustomed to otherwise.

Of course, the owner of BEMAX is free to gift a company with 139 million euros in retained earnings to the first person he meets on the street. However, when calculating tax obligations, the actual market value is assessed to prevent artificial tax evasion schemes, where cash transactions take place under the table while "gifted" assets are officially declared. The state is indifferent to the seller's profit or loss, but it does care about the tax revenue due to its budget. Tax fraud cannot be disguised as a property rights issue through mere rhetoric.

Under the law, which must be adhered to, if the difference between the selling price and the acquisition price of a company share is positive, it constitutes a capital gain subject to taxation. In the case of the BEMAX share sale, when the declared selling price of 750,000 euros is reduced by the so-called acquisition price of 749,800 euros, it follows that Kovačević earned 200 euros from the transaction. Under the Law on Personal Income Tax, this amount constitutes his capital gain and is subject to taxation.

In the year preceding the resale, the company had fixed assets worth 120 million euros, total equity valued at 142 million euros, and 141 million euros in retained earnings from previous years. In 2021, BEMAX recorded a net profit of 14 million euros, while in 2020, its net profit amounted to 27.5 million euros. These figures clearly indicate that Kovačević sold his company for less than 1% of its actual value or total equity. In fact, the declared selling price represents only 5% of the company’s net profit from the previous year.

This clearly confirms that the declared selling price in the contract was artificially reduced to minimize the tax payable to the state.

While his business motives are not relevant to the state, and no one interferes with his choice of partners, the owner of BEMAX continues to evade a legally relevant question of public interest that he cannot avoid despite his attempts at cheap manipulation: Has he complied with the Law on Personal Income Tax, which governs capital gains from the sale of company shares? Instead of resorting to desperate and baseless political tactics, he should publicly answer a straightforward question: Did he submit the Annual Personal Income Tax Return for 2022—the year in which the sale took place—declaring the artificially low selling price, which would have resulted in a tax liability of only 30 euros? Did he even pay those 30 euros to the state, or was that amount also deemed excessive for his "patriotic ethos"?

Among the many manipulations, one inadvertent truth was spoken: "The state of Montenegro has, in the past, sold state-owned companies below their book value." This is true—but such actions were carried out by those whom BEMAX financed, as convincingly testified by the Deputy Prime Minister of Saint Lucia. It was precisely due to such detrimental sales that certain firms gained dominance in civil engineering, aided by rigged rules and preferential treatment.

The era of a corrupt administration, political favoritism, abuses, and privileged individuals is over. Accountability must be upheld, even if it is an uncomfortable reality. It is an inevitable step for a country standing on its own feet and rapidly progressing toward the European Union. The criminal activities and smuggling operations involving this company's affiliates will soon be further exposed and addressed—neither you nor anyone else will evade the rule of law.