director - Ministarstvo finansija
director - Ministarstvo finansija
director - Ministarstvo finansija
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REPUBLIC OF MONTENEGRO<br />
MINISTRY OF FINANCE<br />
BULLETIN III<br />
JANUARY-MARCH 2006.<br />
www.ministarstvo-finasija.vlada.cg.yu<br />
TAX ADMINISTRATION: www.poreskauprava.vlada.cg.yu<br />
CUSTOMS OFFICE: www.gom.cg.yu/carine<br />
ANTI-CORRUPTION DIRECTORATE: www.antikorup.vlada.cg.yu<br />
DIRECTORATE FOR ANTI-MONEY LONDERY: www.gom.cg.yu/aspn<br />
DIRECTORATE FOR REAL ESTATES: www.nekretnine.cg.yu
TABLE OF CONTENTS<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Projest „1000<br />
HOUSING LOANS”<br />
TABLE OF CONTENTS<br />
4-5<br />
INTRODUCTION<br />
- Igor Lukšić, PhD, Minister of Finance<br />
6-9<br />
PROJECT "1000 HOUSING LOANS"<br />
10-17<br />
GUIDEBOOK TO THE TAX SYSTEM<br />
- Koviljka Mihailović, Assistant Minister of Finance<br />
18-21<br />
BUDGETARY SUFICIT<br />
- Mirjana Pešalj, Director, Tax Administration<br />
22-23<br />
TAX ADMINISTRATION<br />
- Gordana Stajčić,<br />
Chief of Cabinet, Tax Administration<br />
24-26<br />
REPORT ON PUBLIC<br />
DEBT OF MONTENEGRO<br />
- Nikola Vukićević, M.Econ,<br />
Coordinator, Public Debt Department<br />
27-28<br />
COOPERATION WITH THE WORLD BANK<br />
- Jadranka Radunović, Coordinator,<br />
International Co-operation Division<br />
2
TABLE OF CONTENTS<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
29-30<br />
31-32<br />
33<br />
34-35<br />
36<br />
37-40<br />
41-42<br />
43-48<br />
STATE AID<br />
- Danijela Jauković, Advisor to the Minister<br />
on Co-operation with the EU<br />
and International Financial Institutions<br />
ENFORCEMENT OF CLAIMS<br />
SECURED UNDER THE CONTRACT<br />
ON FIDUCIARY TRANSFER<br />
OF TITLE TO REAL ESTATE<br />
- Milodarka Novosel, Senior Advisor<br />
ENFORCEMENT OF CLAIMS OF THE GOVERNMENT<br />
OF MONTENEGRO IN COURT PROCEEDINGS<br />
- Gordana Vukoslavčević, Senior Advisor<br />
FUNCTIONING OF THE GAMES OF CHANCE SYSTEM<br />
- DEPARTMENT FOR GAMES OF CHANCE;<br />
Radmila Vorotović, Head<br />
Veljko Begović, Chief Inspector<br />
LAW ON COMPULSORY INSURANCES<br />
IN TRAFFIC<br />
INSURANCE SUPERVISION SERVICE,<br />
Milanka Obradović, Coordinator of the Service<br />
AGENDA OF THE MINISTRY<br />
OF FINANCE FOR 2006<br />
OVERVIEW OF THE ACTIVITIES<br />
OF THE MINISTER OF FINANCE<br />
- PR SERVICE OF THE MINISTRY<br />
- Ana Miljanić, Spokesperson, Maja Bašić, Senior Employee I<br />
MACROECONOMIC<br />
REPORT<br />
Republic of Montenegro<br />
Ministry of Finance<br />
Bulletin of the Ministry of Finance<br />
January-March 2006<br />
NUMBER:<br />
3<br />
PUBLISHED:<br />
quarterly<br />
PUBLISHER:<br />
Republic of Montenegro<br />
The Ministry of Finance<br />
FOR PUBLISHER:<br />
Igor Lukšić Ph.D.<br />
EDITOR-IN-CHIEF:<br />
Ana Miljanić<br />
EDITORIAL BOARD:<br />
Koviljka Mihailović, Milorad Katnić<br />
M.A., Milan Dabović PhD<br />
TRANSLATOR:<br />
Jelena Čađenović<br />
Design:<br />
Adil Tuzović<br />
CONTACT:<br />
PR Office of the Ministry of Finance<br />
TEL:<br />
+381 81 224 581<br />
FAX:<br />
+381 81 224 450<br />
E-MAIL:<br />
mf@mn.yu<br />
WEB:<br />
www.ministarstvo-<strong>finansija</strong>.vlada.cg.yu<br />
ADDRESS:<br />
Stanka Dragojevića 2, Podgorica<br />
PRINT:<br />
Grafotisak<br />
COPYES:<br />
500<br />
3
Introduction<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
MINISTER OF FINANCE<br />
IGOR LUKŠIĆ, PH.D.<br />
Introduction<br />
CONTACT:<br />
PHONE:<br />
+381 81 242-835,<br />
FAX:<br />
+381 81 224 450<br />
E-MAIL:<br />
mf@mn.yu<br />
WEB:<br />
www.ministarstvo-<strong>finansija</strong>.vlada.cg.yu<br />
Dear Readers,<br />
An overriding impression throughout<br />
2005 about Montenegrin<br />
economy being out of recession was<br />
definitely confirmed in the first<br />
quarter of 2006. Favourable macroeconomic<br />
indicators achieved over<br />
the last couple of years, convincingly<br />
prove the macroeconomic stability<br />
required for further growth and development.<br />
Favourable trends are likely<br />
to continue in the course of<br />
2006. Significant increase of the tax<br />
revenues as compared to planned<br />
ones, indicates considerable reduction<br />
of grey economy, and more important,<br />
stronger economic activities.<br />
Expectations of excellent tourist<br />
season, positive effects from restructuring<br />
and privatization of the<br />
banking sector, strong inflow of Foreign<br />
Direct Investments etc., speak<br />
in favour of viability and progress<br />
of Montenegrin economic system.<br />
The above also serves as a proof that<br />
a proper economic policy has been<br />
conducted in the previous period.<br />
Finally, the IMF gave its opinion<br />
about this in early February, when<br />
a three-year arrangement was completed,<br />
which, in addition to having<br />
positive effect on image of Montenegro,<br />
led to further write-off of liabilities<br />
to the Paris Club. Following<br />
regulation of Montenegro<br />
membership to the international<br />
financial institutions, creation of a<br />
new program of co-operation with<br />
the IMF is ahead of us, particularly<br />
in the area of further structural reforms.<br />
In addition to standard program<br />
elements, more attention<br />
should be paid on finances of local<br />
self-governments and public finances<br />
in general, including public<br />
companies. Introduction of the II<br />
pension pillar and continuation of<br />
reforms in the health system will be<br />
key reforms in the forthcoming period.<br />
4
Introduction<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Cabinet-meeting of the Ministy of Finance<br />
Regardless of the highly important<br />
and politically deciding moment,<br />
the reform process may not be<br />
delayed. Particularly important activities<br />
for this year are related to finalization<br />
of a set of property laws,<br />
which are now in the final phase.<br />
Full liberalization of the real estate<br />
market and clear land registers will<br />
further strengthen Montenegro's attractiveness<br />
as an investment location.<br />
Law on Property Rights, Law<br />
on State Property and Law on Survey<br />
and Cadastre are in their final<br />
phase.<br />
Continuation of the tax reform<br />
process aimed at creating a favourable<br />
business environment is also noteworthy.<br />
Introduction of a singlerate<br />
income tax and setting non-taxable<br />
income threshold will make<br />
Montenegro a leading country<br />
among countries with favourble tax<br />
treatment. High competition within<br />
Europe, particularly competition<br />
imposed by new EU member states,<br />
sets our task that Montenegro should<br />
become a champion in liberalization<br />
of its market. This chance should<br />
be used because our region is becoming<br />
one of the most important<br />
markets not only in Europe, but globally<br />
as well. Efforts made at establishing<br />
free trade zone in the region<br />
clearly define this chance.<br />
Functional economic sovereignty<br />
as well as achieved economic selfsustainability<br />
of Montenegro should<br />
logically be continued within formal<br />
independence and international recognition<br />
of Montenegro, which will<br />
facilitate communication with the<br />
partners from the international<br />
community. Montenegro, being one<br />
of the European centers rather than<br />
a part of a Union, will be enabled to<br />
participate in and encourage economic<br />
integration processes on equal<br />
footing. As a result, it will be more<br />
simply to promote numerous resources<br />
which serve for economic development.<br />
Sincerely,<br />
Igor Lukšić, PhD<br />
5
PROJECT "1000 HOUSING CREDITS”<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
PROJECT<br />
„1000 HOUSING<br />
CREDITS”<br />
Project "1000 Housing Credits" was worked out by the<br />
Ministry of Finance and Commission for Housing Issues in<br />
consultation with Montenegrin banks, in order to accomodate<br />
a great number of requests on the basis of unresolved, i.e.<br />
inadequately resolved housing issues of the Montenegrin citizens,<br />
especially citizens employed in the public administration.<br />
Namely, market interest rates and personal income<br />
amount for the greatest number of citizens represent a limitation<br />
to apply for a housing credit in a bank according to bank's<br />
standard terms. In that sense, the Ministry of Finance considered<br />
it appropriate to work out a project, in consultation with<br />
other banks, in order to support as many citizens as possible<br />
to use housing credits, which will be repayable from regular<br />
income within longer repayment periods and with "low"<br />
interest rates.<br />
Longer repayment periods and "low" interest rate implied<br />
possibility of "subsidizing" interest rates. Thereby, we proceeded<br />
from parameters such as: average annual anuity, average<br />
public administration income and average income in the<br />
Republic, in general, average price of monthly rent, average<br />
price of a housing space square meter etc. It was considered<br />
necessary to create conditions to provide for average monthly<br />
anuity in line with average flat rent costs, i.e. maximum halfincome<br />
of a Montenegrin household.<br />
Communication of the Ministry of Finance with the<br />
Montenegrin banks was done through several direct meetings,<br />
which resulted in formulation of concrete offers.<br />
Contract between the Government of the Republic of<br />
Montenegro and representatives of Crnogorska komercijalna<br />
banka, Podgoricka - Societe Generale Bank and Montenegro -<br />
NLB Bank, was signed on April 4, 2006. After that, in the<br />
framework of the Project "1000 housing Credits - We create<br />
conditions for independent life", the contract was signed with<br />
HYPO Alpe - Adria a.d. Podgorica on April 14 and with<br />
Niksicka Bank on April 17.<br />
Contract between the Government of the Republic of Montenegro and<br />
representatives of Crnogorska komercijalna banka, Podgoricka -<br />
Societe Generale Bank and Montenegro - NLB Bank, was signed on<br />
April 4, 2006<br />
The contract was signed with HYPO Alpe - Adria a.d. Podgorica on<br />
April 14<br />
The contract was signed with Niksicka Bank on April 17<br />
6
PROJECT "1000 HOUSING CREDITS”<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
1000 HOUSING CREDITS<br />
- WE CREATE CONDITIONS FOR INDEPENDENT LIFE<br />
GOVERNMENT OF THE REPUBLIC OF MONTENEGRO<br />
IN COOPERATION WITH<br />
Crnogorska Komercijalna Banka, NLB Montenegrobanka<br />
PodgoriČka Banka-Societe Generale Group and HYPO Alpe Adria Bank<br />
REALIZES PROJECT<br />
"1000 HOUSING CREDITS"<br />
Who can be the housing credit beneficiary?<br />
Citizens of Montenegro, who earn regular income from their<br />
permanent employment and in accordance with the criteria<br />
envisaged by the project of the Government of the Republic of<br />
Montenegro ''1000 housing credits".<br />
Basic information on the housing credits terms<br />
- Credit repayment period:<br />
- up to 5.000 eur - repay,ment period up to 5 years;<br />
- up to 15.000 Eeur - repayment period up to 10 years;<br />
- up to 30.000 eur - repay,ment period up to 20 years.<br />
- Interest rate 4% annually.<br />
- Fee for credit utilization 0,5%.<br />
- Security depending on term of payment by means of an<br />
endorser or mortgage.<br />
INDIVIDUAL TERMS TO BE FULFILED<br />
IN ORDER TO BE GRANTED<br />
A CREDIT BY BANKS RESPECTIVELY<br />
NLB MONTENEGROBANKA<br />
- Customer has to be at least 6 months permanently<br />
employed at the time of submitting the claim;<br />
- The required monthly instalment is to be maximum<br />
40% of regular monthly income reduced by the existing liabilities,<br />
or joint family income(reduced by the living<br />
expenses);<br />
- One or more creditworthy guarantors are required for<br />
amounts up to 7.000 eur;<br />
- Mortgage on real estate, which value is 2 times higher<br />
than the credit value, is required for amounts exceeding 7.000<br />
eur;<br />
- Bank reserves the right to refuse granting the credit or to<br />
require additional security in accordance with the credit history<br />
of the customer and financial standing estimate.<br />
Required documentation:<br />
For credit applicant:<br />
- ZKS form duly filled in (all spaces, empty spaces to be<br />
crossed out ) and signed by the borrower;<br />
- Certificate of the income amount of the borrower, certified<br />
by the employer and signed by the borrower;<br />
- Two administrative bans for borrower, certified by the<br />
employer (address of the accounting department is obligatory!);<br />
- Duly signed bill of exchange in one's one hand and filled<br />
in by the endorser with complete data: name and surname,<br />
employer, address, ID card No.;<br />
- Preliminary estimate(pro-forma invoice) of the employer<br />
or Purchase-sale Contract (basis for transfer of funds),<br />
- Photocopy of the valid ID card or passport of the borrower.<br />
For endorser;<br />
- Certificate of the income amount for endorser/s, certified<br />
by the employer and signed by the endorser/s;,<br />
- Declaration of endorser duly certified in the court or by<br />
the bank employee,<br />
- Administrative ban for endorser/s, certified by the employer<br />
(address of the accounting department is obligatory!),<br />
- Photocopy of valid ID card or passport of the endorser.<br />
All forms and explanations can be found at the bank counter or<br />
taken from the website of the bank: www.montenegrobanka.com<br />
CRNOGORSKA KOMERCIJALNA BANKA AD PODGORICA<br />
In order to exercise the right to special purpose credit for purchase<br />
of a flat or house or reconstruction of a flat/house it is<br />
required that credit beneficiary receives the income through<br />
CKB and that monthly income burden is up to 1 of the monthly<br />
income.<br />
Required documentation:<br />
- Claim for credit grant approval<br />
7
PROJECT "1000 HOUSING CREDITS”<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
- Bill of exchange and bill of exchange authorization<br />
- real estate certificate on the basis of which a contract on<br />
mortgage is signed<br />
- Flat or house purchase contract with seller<br />
- Copy of Identity Card<br />
Bank's Credit Committee leaves a possibility to ask for additional<br />
security (insurance, endorser...<br />
These credits are extended without DOWN PAYMENT and<br />
DEPOSIT, and in case of pre-term credit repayment the fee for<br />
the remainder of debt is not collected.<br />
2-3 endorsers (without mortgage) can be provided as credit<br />
security for credit amounts up to 5.000 eur.<br />
PODGORIČKA BANKA - SOCIETE GENERALE GROUP<br />
General terms for submitting a credit claim:<br />
- Hold an account with PodgoriČka Bank, Societe Generale<br />
Group;<br />
- Purchase and sale Contract (preliminary contract) certified<br />
in court;<br />
- Only a member of immediate family, who meets the same<br />
conditions as Debtor (only two persons preferable), can be in<br />
capacity of Co-debtor;<br />
- Debtor and Co-debtor must receive at least 1 salary to the<br />
account (apart from other banks' employees);<br />
- Certificate from official records of the Bank on personal<br />
income funds transferred to the current account for the credit<br />
beneficiary and co-debtor in case of combined income<br />
- If the difference between the income amount stated in<br />
the certificate and the income amount according to the inspection<br />
of account proves to be higher than 15%, the claim is<br />
refused.<br />
- If the difference between the income amount stated in<br />
the certificate and real income transferred through the account<br />
proves to be up to 15%, the claim is worked out on the basis of<br />
the income transferred through the account<br />
- Debtor has to be at least 23 years old at the moment of<br />
submitting the claim, and not older than 65 years at the<br />
moment of the last credit instalment maturity (the same conditions<br />
are valid also for co-debtor in case that his/her salary is<br />
included in the total encumberance);<br />
- Debtor has to be employed permanently for at least 6<br />
months period (the same conditions are valid also for codebtor<br />
in case that his/her salary is included in the total<br />
encumberance);<br />
- Certificate of personal income for credit beneficiary in<br />
case that the customer submits a claim only on the basis of<br />
his/her income, and certificate on the spouse's income if the<br />
total income is encumbered (in that case both partners in<br />
marriage have to receive salary through the Bank account);<br />
- Declaration of the credit beneficiary about transfer of personal<br />
income funds to the current account in the PodgoriČka<br />
Bank if the customer submits a claim only on the basis of<br />
his/her income, and declaration of co-debtor if the ratio<br />
includes total income (in that case both partners in marriage<br />
have to transfer the salary through the Bank account);<br />
- Declaration of salary transfer to the account is not<br />
required for other banks' employees as they are not able to<br />
transfer their income to thePodgoriČka Bank account.<br />
Credit security:<br />
- Bill of exchange, (signed also by the Co-debtor if his/her<br />
salary is included in the total encumberance);<br />
- Administrative ban for Debtor (and Co-debtor if its salary<br />
is included in the total encumberance);<br />
- Proof of ownership of real estate to be offered as mortgage;<br />
- Real estate certificate not older than 1 working day,<br />
which proves that the real estate to be mortgaged is registered<br />
with a note that "there are not any encumberances or limitations";<br />
- Bank's estimator assessment of the value of real estate to be<br />
mortgaged. Estimate is to be based on the construction value;<br />
- Life insurance policy of debtor vinculated in favour of<br />
PodgoriČka Banka - policy value needs to be concluded in<br />
compliance with the credit amount and period of duration;<br />
- Insurance policy for the construction value of the real<br />
estate to bemortgaged against basic and supplementary risks<br />
of water drain, vinculated in favour of PodgoriČka Bank;<br />
- First MORTGAGE on real estate, which is subject matter<br />
of purchase or on other relevant real estate;<br />
- If the real estate to be credited is mortgaged, down payment<br />
of 25% is obligatory;<br />
- If some other real estate is mortgaged, ratio between that<br />
real estate value and value of the real estate to be credited<br />
must be 1.25:1 and in that case down payment is not required;<br />
- The real estate owner's approval to mortgage the property,<br />
as well as his/her spouse's approval (if he/sheis the owner<br />
of real estate in marriage) certified in the relevant court;<br />
- Surety Contract signed by the Co-debtor (if his/her salary<br />
is also included in the total encumberance).<br />
HYPO ALPE ADRIA BANKA<br />
Terms for submitting a credit claim:<br />
- Claimant holds Montenegrin citizenship<br />
- Age: from 18 - and the last annuity is due before the age of 65<br />
- Account with the Hypo Bank: regular account holder<br />
- Employment: permanent employment<br />
Credit capacity of the parties to the credit:<br />
- Monthly annuity has to be equal or less than 50% (1/2)<br />
8
PROJECT "1000 HOUSING CREDITS”<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
of the net monthly income after other deductions<br />
- If the beneficiary does not fulfil the aforementioned<br />
credit capability condition, credit capability can be supplemented<br />
Documentation needed:<br />
- Credit Claim Form filled in<br />
- Borrower Data Form filled in<br />
- Administrative ban on all parties to the credit;<br />
- Certificate/Declaration form filled in and certified<br />
- Photocopies of identity cards of credit beneficiaries and<br />
joint guarantors<br />
- Certified payment orders of earnings for the last three<br />
months of all parties to the credit<br />
- Abstract from property registers and Real Estate Register,<br />
not older than 3 days ;<br />
Security instruments:<br />
- Two creditworthy indorsers for credits up to eur 5.000<br />
- First mortgage of the least estimated value of 1:1,25, for<br />
credits to the amount higher than eur 5.000<br />
- Real estate insurance against basic risks;<br />
- Administrative ban of credit beneficiary (endorser);<br />
- Bill of exchange authorization signed by the credit beneficiaries<br />
and joint gaurantor<br />
- Bill of exchange signed by all parties to the credit;<br />
- Life insurance for credits to the amount higher than eur<br />
5.000 and repayment period longer than 10 years<br />
- Joint Guarantee Contract or Declaration of Joint<br />
Guarantee<br />
- Bank can require additional security<br />
NIKŠIĆKA BANKA AD NIKŠIĆ<br />
Interest rate and other expenses:<br />
- Fixed interest rate: 6,4% annually, out of which share of<br />
the interest rate repayment of the Government of the Republic<br />
of Montenegro is 2,4%, while the rest 4% is repaid by the credit<br />
beneficiary;<br />
- Default interest rate: One third of regular interest rate,<br />
augmented by one percentage point in relation to the normal<br />
interest rate;<br />
- Fee: 0,50% one-off payment from the amount of the<br />
extended credit, on the occasion of granting the credit;<br />
- Pre-term credit repayment: 2,00% for the remaining<br />
amount of the credit principal;<br />
Credit risk security:<br />
- Three endorsers, certified administrative bans for credit<br />
beneficiary and endorsers (i.e. permanent order of suspension<br />
of a part of income to the benefit of the Bank) and a blank bill<br />
of exchange with the credit beneficiary's acceptance, avalled by<br />
the endorser are needed for credits up to eur 5.000,00;<br />
- For credits from eur 5.001,00 to eur 30.000,00, first mortgage<br />
is taken out and the credit beneficiary submits to the<br />
Bank also 2 (two) certified administrative bans (i.e. permanent<br />
order of suspension of a part of income to the benefit of the<br />
Bank) and a blank bill of exchange with the credit beneficiary's<br />
acceptance. Apart from the housing space which is being purchased<br />
or reconstructed from the credit funds, the credit beneficiary<br />
can offer also another's real estate as mortgage to be<br />
taken out in favour of the Bank, with presentation of its<br />
owner's approval certified by court. Minimum value of the<br />
hypotecated real estate must be by 50% higher than the credit<br />
amount to be extended. Estimate of the real estate value in<br />
order to take out a mortgage is done by the Directorate for<br />
Real Estate of the Republic of Montenegro.<br />
Property insurance<br />
- on the occasion of concluding the credit, credit beneficiary is<br />
obliged to present to the Bank an insurance policy of the hypotecated<br />
real estate, which is vinculated in favour of the Bank.<br />
Required documentation:<br />
- credit claim,<br />
- certificate of the income amount,<br />
- request for issuing a permanent order for suspension to<br />
the Bank or administrative bans,<br />
- blank accepted (avalled) bill of exchange,<br />
- Copies of Identity Cards for credit beneficiary, co-debtor<br />
and endorser,<br />
- Real estate certificate for mortgaged real estate, i.e. a copy<br />
of urban plan paper (only for house, if it is mortgaged),<br />
- insurance policy of hypotecated real estate,<br />
- certificate of the housing space ownership (for adaptation<br />
and reconstruction), i.e. certificate of non-ownership of a<br />
housing space (for purchase crediting),<br />
- certificate of household,<br />
- certificate of years of service.<br />
Credit realization:<br />
- Credit up to eur 5.000,00 is disbursed by transfer to the<br />
credit beneficiary's account, which is open with the Bank.<br />
- Credit exceeding eur 5.001,00 is disbursed to the Bank giro<br />
account of the housing space sellers or contractor of adaptation<br />
or reconstruction works<br />
9
Guidebook to the tax system<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
KOVILJKA MIHAILOVIĆ, ASSISTANT TO THE MINISTER OF FINANCE<br />
Guidebook to the<br />
tax system of<br />
Montenegro<br />
Introductory Remarks<br />
Montenegro launched reforms of the tax system and overall financial system in 2001.<br />
Main objectives of the tax reform are primarily focused on: encouraging domestic production<br />
and investments; making Montenegro more attractive to foreign investors; making locally<br />
produced goods more competitive at foreign markets; harmonization of the tax system with the EU Directives and international<br />
standards; making the tax system simpler, more efficient and easier for implementation; and generating income required for<br />
budget needs support. The tax reform is based on the principles of simplicity, fairness, impartiality, efficiency, stability and applicability.<br />
Key segments of the tax reform are: introduction of the value added tax (which has been applied since 1 April 2003), which replaced<br />
previous retail tax; and use of the self-assessment principle according to which a tax liability is calculated by a taxpayer himself,<br />
while the related procedure is controlled by a tax authority. In addition, the tax administration has also been transformed, and<br />
some competences related to collection of local revenues have accordingly been delegated to the local self-government.<br />
STRUCTURE OF THE TAX SYSTEM<br />
Montenegrin Tax System includes the following taxes:<br />
1. Customs and other Duties,<br />
2. Excises,<br />
3. Value Added Tax,<br />
4. Corporate Income Tax,<br />
5. Personal Income Tax,<br />
6. Property Tax,<br />
7. Real Estate Transfer Tax,<br />
8. Insurance Premium Tax,<br />
9. Tax on Use of Passenger Motor Vehicles, Vessels and Aircraft<br />
10. Contributions for Compulsory Social Insurance (pension,<br />
disability, health and unemployment insurance),<br />
11. Sales Tax on Used Motor Vehicles, Vessels and Aircraft,<br />
12. Republic Stamp Duties (administrative fees and duties, court<br />
fees, registration fees),<br />
13. Charges for Use of Natural Resources of Common Interest<br />
(forests, waters, mineral resources, roads, coastal zone, organization<br />
of games of chance), and<br />
14. Local Revenues (taxes, charges and fees).<br />
The Table below shows a comparative review of structure of<br />
realized revenues by individual tax types and levels (Republic<br />
and Local level) for 2003 and 2004.<br />
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BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
MAIN CHARACTERISTICS<br />
OF RESPECTIVE TAX TYPES<br />
1. CUSTOMS AND OTHER DUTIES<br />
The customs system is regulated by the Customs Law ("Official<br />
Gazette of RM", No. 07/02, 38/02, 72/02, 21/03, 31/03 and<br />
29/05), Law on Customs Tariff ("Official Gazette of RM", No.<br />
75/05) and Law on Customs Administration, including relevant<br />
by-laws adopted on the basis of the above laws.<br />
The Customs Law regulates the customs procedure; rights and<br />
liabilities of persons participating in the customs procedure; and<br />
rights, liabilities and powers of the competent authority for clearance<br />
of goods.<br />
Law on Customs Tariff regulates nomenclature of goods and<br />
amount of tariff rates. The Law covers 10.229 of tariff items, the<br />
number of which has been increased by 1.675 or 19,58% comparing<br />
to previous solution. Average nominal tariff protection rate is<br />
6,17%.<br />
Customs duty is charged and levied as a percentage of the value<br />
of goods ("ad valorem"), ranging from 0% to 30%, or as an amount<br />
of local currency per unit of measurement (specific duty) for import<br />
of certain agricultural products. No customs duty is levied on<br />
exported goods.<br />
Law on Customs Administration regulates scope of work of<br />
the tax authority (The Customs Administration) as well as rights, liabilities<br />
and responsibilities of the customs officers.<br />
2. EXCISES<br />
Excise tax payment liability is regulated by the Excise Tax Law<br />
("Official Gazette of RM", No. 65/01 and 76/05), which was adopted<br />
at the end 2001, and has been in force since 1 April 2002, and<br />
by regulations adopted on the basis of the said Law. The Law was<br />
amended at the end of 2005, mainly with respect to manner of calculation<br />
and payment of excise tax on cigarettes.<br />
Excise tax is levied on: alcohol and alcoholic beverages, tobacco<br />
products, and mineral oils, mineral oil products and substitutes.<br />
Excise tax on alcohol and alcoholic beverages is payable at<br />
the following rates:<br />
- EUR 1,90 per alcohol volume content per hectoliter of beer<br />
- EUR 0 (zero) per hectoliter of table wine;<br />
- EUR 35 per hectoliter of sparkling wine;<br />
- EUR 40 per hectoliter of other fermented beverages<br />
- EUR 70 per hectoliter of light alcoholic beverages;<br />
- EUR 550 per hectoliter of pure alcohol<br />
Excise tax on mineral oils, mineral oil products and substitutes<br />
is paid as follows:<br />
Gasoline and other light oils:<br />
- Euro 0.120/kg for aviation gasoline (tariff code CN 2710.00 11<br />
10);<br />
- Euro 0.364/liter for motor unleaded gasoline (tariff code CN<br />
2710.00 11 20);<br />
- Euro 0.120/kg for fuel for jet gasoline motors (tariff code CN<br />
2710.00 11 30),<br />
- Euro 0.364/liter for other types of motor fuel (tariff code CN<br />
2710.00 11 90);<br />
Kerosene:<br />
- Euro 0.120/kg for petroleum (kerosene) for motors, (tariff code<br />
CN 2710.00 21 10);<br />
- Euro 0.120/kg for fuel for jet kerosene motors (tariff code CN<br />
2710.00 21 20);<br />
- Euro 0.120/kg for other types of kerosene (tariff code CN<br />
2710.00 21 90);<br />
- Euro 0.069/kg for fuel for jet kerosene motors (tariff code CN<br />
2710.00 21 20), which is used for heating;<br />
Gas oils:<br />
- Euro 0.270/liter for Diesel fuel (tariff code CN 2710.00 31 00);<br />
- Euro 0.120/liter for Diesel fuel (tariff code CN 2710.00 31 00)<br />
which is used as heating oil;<br />
- Euro 0.270/liter for ship and other fuels (tariff code CN<br />
2710.00 32 00);<br />
- Euro 0.120/liter for other oils (tariff code CN 2710.00 39 00);<br />
Heating oils:<br />
- Euro 0.023/kg for low-sulfur oil for metallurgy (tariff code CN<br />
2710. 00 41 00);<br />
- Euro 0.023/kg for other heating oils (tariff code CN 2710. 00<br />
49 00);<br />
Oil gas and other gas hydrocarbons:<br />
- Euro 0.069/kg for mixtures of propane and butane gas (tariff<br />
code CN 2711.19 00 10)<br />
- Euro 0.069/kg for other oil gas (tariff code CN 2711.19 00 90).<br />
Excise tax on cigarettes includes specific and proportional excise<br />
tax. Specific excise tax for all cigarettes amounts 1,00 eur/kg<br />
(0,02 eur/per pack). Proportional excise tax is 26% of retail cigarette<br />
price including excise tax and VAT.<br />
Retail price of cigarettes is determined by manufacturer himself<br />
or by importer and the same is published in the "Official Gazette of<br />
RM".<br />
Excise tax for other tobacco products is paid per kilogram<br />
and amounts:<br />
- Euro 10/kg for cigars and cigarettes,<br />
- Euro 20/kg for shredded tobacco (for rolling cigarettes),<br />
- Euro 15/kg for other smoking tobacco<br />
Excise Taxpayer is a manufacturer or importer of excise goods<br />
or person to which excise tax liability may be transferred in conformity<br />
with the Law (excise licensee, tax exempt user).<br />
Excise tax liability arises when the excise goods is produced<br />
on the territory of Montenegro or imported into Montenegro.<br />
Excise tax is paid on imported excise goods concurrently with<br />
payment of customs duties, except for cases when deferred excise<br />
tax payment is allowed (storage in a customs warehouse or plant of<br />
a tax exempt user).<br />
Excise tax liability on cigarettes arises on a day of taking over<br />
the control excise stamps issued by the Tax Administration.<br />
Local excise taxpayer calculates excise tax by himself. The excise<br />
tax is calculated on monthly basis, while the calculation is given in<br />
a tax return which is to be filed with the tax authority until 15th<br />
day of a month for the previous month, which is also a deadline<br />
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BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
for payment of such tax.<br />
In exceptional cases, excise tax on cigarettes is paid within 60<br />
days from the day of taking over the control excise stamps.<br />
Marking of excise goods - Prior to their releasing into use or<br />
free sale, a producer or importer shall mark tobacco products and<br />
alcoholic beverages, except for beer, with excise tax stamp.<br />
Tobacco products and alcoholic beverages to be exported for<br />
which foreign supplier failed to submit the excise tax stamps, shall<br />
be marked with a special export stamp.<br />
Tobacco products and bottled alcoholic beverages which are<br />
sold in duty free shops should be marked with a separate stamp.<br />
Marking of tobacco products and alcoholic beverages with control<br />
excise stamps is regulated in detail under the Decree on Marking<br />
Tobacco Products and Alcoholic Drinks with Control Excise Stamps<br />
("Official Gazette of RM", No. 82/05).<br />
3. VALUE ADDED TAX (VAT)<br />
Value added tax liability ("Official Gazette of RM", No. 65/01,<br />
38/02, 72/02, 21/03 and 76/05),is regulated by the Value Added<br />
Tax Law, which was adopted at the end of 2001, and has been effective<br />
from 1 April 2003, and by regulations stemming from the<br />
said Law. The Law is based on the EU Directive VI Guidelines. Taxation<br />
of products and services is done according to the place of consumption,<br />
using a principle of consignment point or destination.<br />
Export of goods is exempt from VAT payment (zero rate is applied),<br />
while import of good is taxed, having the same treatment as domestic<br />
products at local market.<br />
Tax liability is determined according to the invoice method, or<br />
method of deduction of "tax on tax". Taxpayer determines a tax liability<br />
alone, by reducing his tax liability on the account of turnover<br />
of goods and services by the amount of calculated or paid VAT<br />
on purchase of goods and services or import of goods.<br />
Subject of taxation - Value added tax is calculated and paid<br />
on: delivery of goods and services rendered by a taxpayer for a consideration<br />
in the framework of his business activities; and on import<br />
of goods.<br />
Newly constructed real estate is also subject to taxation (land is<br />
not subject to taxation).<br />
Tax rates - The Law sets forth two positive tax rates: standard<br />
tax rate of 17% and lower tax rate of 7%.<br />
Zero rate is applied on export transactions and on delivery of<br />
medicines and medical devices which are funded by the Republic<br />
Health Insurance Fund.<br />
Lower tax rate of 7% is applied on:<br />
1) Staple-foods (milk, bread, fat, oil and sugar);<br />
2) Medicines, including medicines for veterinary use, except for<br />
prescription drugs covered by the Republic Health Insurance Fund.<br />
3) Orthotic and prosthetic devices, and medical devices surgically<br />
implanted in human body, except for medical devices covered by the Republic<br />
Health Insurance Fund;<br />
4) Textbooks and teaching aids;<br />
5) Books, monographies and serial publications;<br />
6) Accommodation services in hotels, motels, aparthotels, tourist<br />
settlements, pansions, camps and villas;<br />
7) Drinking water, except for bottled water;<br />
8) Daily newspapers and periodicals, except for press, which fully<br />
or mostly includes advertising contents;<br />
9) Public transportation of passengers and their personal luggage;<br />
10) Public hygienic services;<br />
11) Funeral services and products related to such services;<br />
12) Copyrights and services in the field of education, literature and<br />
art;<br />
13) Copyrights in the field of science and artifacts, collections and<br />
antiquities;<br />
14) Services charged through tickets for cinema and theatre shows,<br />
concerts and similar cultural and sports manifestations, except for those<br />
legally exempt from VAT<br />
15) Use of sport facilities for non-profit purposes;<br />
16) Fodder, fertilizers, pesticides, reproduction seeds, seedlings and<br />
breeding stock.<br />
Tax Exemptions - Law provides for several types of exemptions:<br />
for services of public interest (public postal services, health services,<br />
social security services, pre-school education services, sport, religious<br />
and other public services); import of goods (products brought<br />
in Montenegro within transit customs procedure, services relating<br />
to import of goods etc.); temporary import of goods (products<br />
imported on temporary basis provided that they are exempt<br />
from customs duty according to the custom regulations), and special<br />
exemptions (import of goods to be inspected by the customs<br />
authority; products that enter free customs zone or free customs<br />
warehouse; and products under the customs storage procedure or<br />
under import procedure for export on the basis of delay)<br />
Tax period means a calendar month. Taxpayer is obliged to file<br />
monthly VAT return. Tax return is filed by the 15th day in a month<br />
following the month for which a tax liability is paid. VAT on import<br />
is paid concurrently with the customs duty payment. (VAT is a part<br />
of the customs liability).<br />
VAT Refunding - Taxpayer shall be refunded VAT for: local transactions<br />
within 60 days from the day of filing VAT to be calculated<br />
(until 1 January, the deadline was 90 days); major importer and<br />
taxpayer disclosing more than three times in row a surplus of input<br />
VAT shall be refunded such VAT within 30 days from the day of filing<br />
VAT to be calculated (previously, 60 days).<br />
Special taxation procedures - Special taxation procedures are<br />
provided for small entrepreneurs, farmers, travel agencies and sales<br />
agents of used products, artifacts, collections and antiquities. Small<br />
entrepreneurs, whose taxable income is less than 18.000,00 eur for<br />
* Until 1 January 2006, single tax rate of 17% was applied. Since then, lower tax rate of 7% is effective.<br />
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the last 12 months, are not obliged to register for VAT payment. If<br />
they register for VAT by themselves, they shall be obliged to stay within<br />
the system for three years. Farmers (who are not VAT payers) are<br />
entitled to lump sum remuneration to the amount of 5% of their<br />
products sale price (with respect to this amount, a taxpayer who<br />
purchased agricultural products shall be granted a tax credit)<br />
4. CORPORATE INCOME TAX<br />
Corporate income tax liability is introduced by the Law on<br />
Corporate Income Tax (Official Gazette of RM, No. 65/01,<br />
80/04), which was adopted at the end of 2001 and has been in force<br />
from 1 January 2002 and by regulations passed on the basis of<br />
the said Law. The Law was amended in 2004, regarding tax rates and<br />
tax relieves.<br />
Corporate Income Taxpayer - Corporate income taxpayer is a<br />
resident or non-resident legal person performing an activity for<br />
profit earning. A limited partnership is also subject to corporate income<br />
tax. Resident legal person is a person established in the Republic<br />
of Montenegro or has its place of management and control on<br />
the territory of Montenegro. Non-resident legal person is a person<br />
that is not established in the Republic of Montenegro and has its<br />
place of management and control outside of Montenegro.<br />
Subject of taxation - Profit made by a resident in or outside of<br />
Montenegro is subject to taxation. Profit made by a non-resident<br />
in Montenegro is subject to taxation. Profit made by a permanent<br />
business unit of a non-resident is subject to taxation. Permanent<br />
business unit means permanent place of business through which<br />
a legal person fully or partially runs its business and which is organized<br />
in one of the following forms: head office, branch office, office,<br />
factory, workshop, mine, oil or gas fields, quarry or any other<br />
place where natural resources are being exploited. Construction site<br />
or assembled structure shall be deemed a business unit only if it<br />
lasts more than six months.<br />
Sources of income are profits made from: sale of goods produced<br />
in Montenegro; providing services in Montenegro; interest realized<br />
by a resident taxpayer or permanent business unit of non-resident;<br />
dividends paid by resident; use of property rights in Montenegro;<br />
exploitation of natural resources; immovable and movable<br />
property located on the territory of Montenegro; sale of immovable<br />
and movable property if the seller of which is in Montenegro;<br />
insurance and re-insurance against risk realized in Montenegro; other<br />
income from operations in Montenegro.<br />
Corporate income tax is not paid by: the Central Bank of Montenegro,<br />
public funds and public institutions which are established<br />
by Montenegro or local self-government, except for profit made by<br />
selling of goods and services on the market.<br />
Tax base and tax rate - Corporate income tax base includes<br />
taxable income of a taxpayer. Corporate income tax rate is proportional<br />
and amounts 9% of the tax base.<br />
Taxpayer is obligated to account for, withhold and pay tax after<br />
deduction for payments made on the basis of: dividends and share<br />
in the legal person's profit, royalties, interests and revenues from<br />
the lease of real estate paid to a non-resident legal person. The tax<br />
rate amounts to 15%, except for interests for which the tax rate<br />
amounts to 5%.<br />
Withholding tax is not paid on dividends and shares in profit<br />
used for increase of equity of a taxpayer.<br />
Tax exemptions - A newly established legal entity that conducts<br />
a production activity in an economically underdeveloped municipality<br />
is exempt from paying profit tax for the first three years<br />
upon the start-up of the activity.<br />
Newly established business unit conducting a production activity<br />
in an underdeveloped municipality is also exempt from paying<br />
profit tax for a period of three years, in proportion with the share<br />
of such profit in the total profit of the taxpayer.<br />
The Law provides for three types of tax relieves, as follows:<br />
On the basis of hiring new employees - Tax base shall be reduced<br />
to a taxpayer who hires new employees for a permanent employment<br />
in a business year, but not less than two years, by gross<br />
salaries of such employees plus pertaining contributions for compulsory<br />
social insurance paid by employer. This tax relief shall be<br />
applied for a period of one year from the day of hiring a new employee.<br />
On the basis of investments in securities - If profit from capital<br />
investment is used for purchase of new securities, such profit is not<br />
taxable, if it is reinvested within 12 months from its arising. Profit<br />
from sale of securities held by a taxpayer for more than two years<br />
in his portfolio is exempt from taxation.<br />
For program activities of the NGOs - Legal entities established<br />
as non-governmental<br />
organizations are exempt from profit tax up to the amount of<br />
Euro 4,000, if they use this profit in order to attain the objectives<br />
for which they have been established.<br />
The exemption is established by the decision of the competent<br />
tax authority.<br />
Avoiding double taxation - Resident taxpayer who makes<br />
profit outside of Montenegro and pays tax on such profit in another<br />
state is granted a tax credit amounting to the profit tax paid in<br />
that country. The tax credit is limited to the amount of tax that<br />
would be paid according to applicable tax rate in Montenegro<br />
Calculation and payment of profit tax - Tax period for which<br />
the profit tax is calculated covers fiscal year (calendar year, except for<br />
in case of liquidation or start-up of activities in the course of a year).<br />
* Until 2005 two tax rates were applied. Tax rate amounted to 15% for profit up to 100.000 eur; tax rate amounted to 20% for profit over 100.000 eur<br />
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Profit tax is calculated following expiration of a fiscal year or<br />
another tax period, according to the tax base realized in that period.<br />
Taxpayer pays profit tax in the course of a year by paying<br />
monthly tax advances, the amount of which is determined on the<br />
basis of profit tax return for previous year.<br />
Tax advances is payable by the end of the current month for a<br />
previous month to the amount of 1/12 of a tax liability for preceding<br />
year.<br />
Tax return - Profit taxpayer is obliged to file tax return to the<br />
competent tax authority for the period for which the profit tax is<br />
calculated. The tax return is filed within three months at the latest<br />
from expiration of the period for which the tax is calculated. The<br />
tax calculated in the tax return shall be paid within the same period.<br />
of amount of Revenues exempt from Personal Income Tax (Official<br />
Gazette of RM, No. 1/06), defines several types of revenues which<br />
are exempt from personal income tax (meal allowances, per diems<br />
for business travels, jubilee awards etc.)<br />
Tax base - Personal income tax base includes a taxable income.<br />
The taxable income is a difference between income and recognized<br />
expenditures (costs) incurred by the taxpayer with respect to such<br />
income earning and maintaining.<br />
Tax rates - Annual personal income tax is computed by using<br />
the following tax scale:<br />
5. PERSONAL INCOME TAX<br />
Personal income tax liability has been introduced by the Law<br />
on Personal Income Tax ("Official Gazette of RM", No.65/01 and<br />
37/04) effective from 1 July 2002, and by regulations stemming<br />
from the said Law. The Law was amended in 2004 with respect to<br />
tax rates and tax relieves.<br />
Taxpayer - Personal income taxpayer is a resident or non-resident<br />
natural person who earned income from sources determined<br />
under the Law. When two or more natural persons jointly earn income,<br />
a taxpayer is any of these persons in proportion with the share<br />
in such income.<br />
The following persons are exempt from paying income<br />
tax:<br />
- Staff members of foreign diplomatic missions in Montenegro<br />
and members of their households, if they are not citizens of Montenegro;<br />
- Staff members of foreign consular offices and members of<br />
their households, if they are not citizens of Montenegro;<br />
- Officers and experts of the UN technical assistance programs<br />
and their specialized agencies;<br />
- Honorary consuls of foreign states, but only for the income received<br />
from the state that appointed them to that position<br />
- Officers, experts and staff of other international organizations,<br />
if they are not citizens of Montenegro or if they not reside in<br />
Montenegro;<br />
Revenues are not considered to be personal income if received<br />
on the following basis: Assistance in the event of destruction<br />
or damage to property due to natural disasters and other extraordinary<br />
events; Compensation under health insurance, except<br />
for compensation of salaries; Inheritance and gifts; Games of chance<br />
and prize competitions; Objects, life and property insurance; Organized<br />
social and humanitarian aids; Scholarships and students<br />
credits; Pension severance payments.<br />
In addition to the above revenues, the Decree on Determination<br />
Sources of Income - Personal income tax is paid on revenues<br />
earned on the basis of: personal earnings; independent activities;<br />
property and property rights; capital and capital gain.<br />
Personal income taxation - Personal income means an income<br />
that a taxpayer earned on the basis of employment and earnings<br />
defined under the employment. Taxable income from personal income<br />
includes gross earnings.<br />
Personal income tax is calculated, withheld and paid by employer<br />
or payer of such earnings, every time such earnings are disbursed,<br />
using a monthly tax scale:<br />
Taxation of independent activities - Income from independent<br />
activities includes an income earned from: commercial activities,<br />
freelance professions, professional and intellectual services<br />
and other independent activities other than main activity of a taxpayer,<br />
which are performed from time to time for profit earning.<br />
Taxable income from independent activities is a taxable profit of<br />
the taxpayer.<br />
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Tax advances on income from independent activities are paid<br />
monthly to the amount of 1/12 of the tax liability under the annual<br />
tax return for preceding year.<br />
Tax advance which is paid on this account shall be deemed a tax<br />
credit with respect to tax liability under the tax return.<br />
Taxpayers who earn income from intermittent independent activities<br />
shall be recognized standard expenses to the amount of 35%<br />
of earned income (if their real expenses are not documented), while<br />
the tax rate is 20%.<br />
Lump sum taxation of income from independent activities<br />
- A taxpayer, whose total turnover in a year preceding the year<br />
for which the tax is determined (or whose expected turnover in the<br />
moment of start-up of activities) is less than Euro 18.000 can be allowed<br />
to pay the annual lump sum tax.<br />
The Rulebook on Lump Sum Taxation of Income from Independent<br />
Activities regulates in detail the lump sum taxation, and the<br />
taxpayers are classified in 4 groups depending on the type of their<br />
activity, while each group is classified into 4 subgroups depending<br />
on the amount of achieved turnover.<br />
Taxation of Property and Property Rights- Income from property<br />
and property rights includes revenues earned on the basis<br />
of: renting of movable and immovable property; time-bound cession<br />
of copyrights, industrial property rights and other rights.<br />
Tax base (taxable income) for payment of the tax on income<br />
from property and property rights includes a difference between<br />
total income earned from renting of movable and immovable property,<br />
copyrights and industrial property rights and total expenses<br />
incurred with respect to earning such income in the same tax period.<br />
Expenses incurred on the basis of property and property rights<br />
include real expenses incurred with respect to earning such income<br />
(if they are documented) or standard expenses to the amount of<br />
35% of the income earned from property and property rights, except<br />
for income from renting of rooms, apartments and houses for<br />
holiday to travelers and tourists, where standard expenses amount<br />
to 50% of the income earned.<br />
Tax advance on income from property and property rights is calculated,<br />
deducted and paid in the course of the year by a payer of<br />
related receipts (legal person or entrepreneur), or a taxpayer (in case<br />
of direct income earning) concurrently with collection of such<br />
receipts by applying the tax rate of 20% on the taxable income.<br />
Taxation of income from capital -Income from capital includes<br />
revenues on the basis of: interests; shares in profit earned by<br />
members of management board or employees in cash or in shares;<br />
use of property or services by capital owners or co-owners for their<br />
private purposes.<br />
Payer of income from capital is obliged to calculate, withhold<br />
and pay a tax on income from capital concurrently with payment<br />
of revenues at the rate of 15%, except for income from interests made<br />
by non-residents (tax rate is 5%).<br />
Taxation of income from capital gains - Capital gain includes<br />
income from sale of a real estate or share in the legal persons'<br />
property and securities (assets) if the sale is performed within 2<br />
years from the day of acquisition of such assets.<br />
Taxable income from capital gain is a difference between sale<br />
and acquisition price of the assets, adjusted by increase of retail prices<br />
from the day of acquisition to the day of sale of such assets.<br />
A resident pays the tax concurrently with filing of the annual<br />
tax return, while the taxable income from capital gain is included<br />
in the tax base to the amount of 50%.<br />
Tax on capital gains earned by a non-resident is paid at the source<br />
at the rate of 15%.<br />
Filing of Annual Tax Return - Personal income taxpayer is<br />
obliged to file annual tax return to the competent tax authority<br />
upon expiration of a fiscal year by end April of the current year for<br />
a preceding year.<br />
The taxpayer calculates personal income tax by himself in the<br />
tax return, by applying progressive tax rates on the tax base, while<br />
the total tax so calculated is reduced by the tax advances paid at<br />
sources.<br />
If, by paying the tax advances, a taxpayer overpaid the tax under<br />
the tax return, the amount of overpaid tax is refunded to him<br />
at his personal request or is included in a tax advance for the next<br />
tax period.<br />
Persons exempt from filing of annual tax return - Annual<br />
tax return is not filed by a taxpayer for income earned on the basis<br />
of: personal income stemming from employees' wages, if such income<br />
is earned with one employer in the same accounting period; income<br />
from other independent activities other than main activity of<br />
the taxpayer; income from capital; income from independent activities<br />
taxed at the flat-rate, where the tax advances paid are deemed<br />
to be finally determined tax on that account.<br />
6. CONTRIBUTIONS FOR COMPULSORY<br />
SOCIAL INSURANCE<br />
Payment of contributions for compulsory social insurance is regulated<br />
by the following laws: Law on Pension and Disability Insurance<br />
(Official Gazette of RM, No. 54/03, 39/04 and 79/04), effective<br />
from 1 January 2004, Law on Health Insurance (Official<br />
Gazette of RM, No. 39/04) effective from 10 June 2004, and Law<br />
on Social Insurance Contributions (Official Gazette of RM, No.<br />
23/93 and 45/98), the section relating to unemployment insurance<br />
contributions, while its underlying solutions have been in force<br />
since 1993.<br />
The above Laws govern all issues relating to payment of contributions<br />
for respective types of compulsory social insurance (insured,<br />
payer, base, rate, manner of payment etc.). Main principle is<br />
15
Guidebook to the tax system<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
that these contributions for compulsory social insurance are paid<br />
by the employee (the insured) and employer.<br />
Gross personal income is a base for calculation of the contributions,<br />
which implies net personal income (wage), tax and contributions<br />
paid by the employee out of such income.<br />
Contribution rates on Personal Income of Employees (wages<br />
etc.) are as follows:<br />
Contributions paid by entrepreneurs - Entrepreneurs (insured<br />
persons in the framework of independent activities) pay contributions<br />
for compulsory social insurance at the following rates: for<br />
pension and disability insurance 21.6%; for health insurance 13.5%,<br />
and for unemployment insurance 1%.<br />
Taxable income from independent activities (net income) is a<br />
base for payment of these contributions, which may not be less<br />
than average wage in the Republic for a month for which the contribution<br />
is paid.<br />
Contribution limits -The Law on Pension and Disability Insurance<br />
sets maximum annual base for payment of contributions for<br />
pension and disability insurance, which is 18.070 eur for 2006.<br />
7. REAL ESTATE TRANSFER TAX<br />
Real estate transfer tax liability (only used, not a new real estate)<br />
has been introduced by the Law on Real Estate Transfer Tax<br />
("Official Gazette of RM", No. 69/03), effective from the beginning<br />
of 2004. The real estate transfer tax rate amounts to 2% of the market<br />
value of a real estate (on a newly constructed real estate transfer,<br />
the VAT is paid at the rate of 17%).<br />
Governmental agencies, local self-government units and international<br />
organizations are exempt from the tax. Real estate transfer<br />
tax is not paid by natural persons who solve their housing problems<br />
by acquiring such real estate, however not exceeding 20m2 per a<br />
member of the household. Real estate transfer tax is not paid by natural<br />
persons.<br />
8. SALES TAX ON USED<br />
MOTOR VEHICLES,<br />
VESSELS AND AIRCRAFT<br />
Sales tax on used motor vehicles, vessels and aircraft is regulated<br />
by the Law on Used Motor Vehicles, Vessels and Aircraft<br />
Sales Tax ("Official Gazette of RM", No. 55/03), effective from October<br />
2003.<br />
The taxpayer is a purchaser or acquirer of the used motor vehicle,<br />
vessel or aircraft, provided that the VAT is not paid on sale of the<br />
same. Tax rate amounts to 5% of the market value of the above products.<br />
Tax exemptions are highly reduced and are related to inheritance<br />
and gifts in the first order of succession.<br />
9. TAX ON USE OF PASSENGER<br />
MOTOR VEHICLES,<br />
VESSELS AND AIRCRAFT<br />
Tax on use of passenger motor vehicles, vessels and aircraft liability<br />
has been introduced by the Law on Tax on Use of Passenger<br />
Motor Vehicles, Vessels and Aircraft ("Official Gazette of<br />
RM", No. 28/04 and 37/04), effective from early May 2004. The tax<br />
rate on motor vehicles ranges from 15 to 150 eur (tax liability is reduced<br />
by 5% for each year of service life of a vehicle, however not<br />
more than 70%), for motorcycles from 10 to 200 eur, for boats and<br />
yachts from 5 to 400 eur and for aircraft from 1.000 to 5.000 eur.<br />
10. INSURANCE<br />
PREMIUM TAX<br />
This tax is paid by insurance companies irrespective of whether<br />
they are performing the insurance operations personally or through<br />
their agents. The tax rate is 6% on auto liability insurance premiums,<br />
and 3% on Casco insurance of motor vehicles. The tax liability<br />
is payable by the 10th day in a month for preceding month.<br />
Insurance premium tax liability has been introduced by the Law<br />
on Insurance Premium Tax ("Official Gazette of RM", No. 27/04<br />
and 37/04), effective from early May 2004.<br />
12. REPUBLIC STAMP DUTIES<br />
(ADMINISTRATIVE FEES AND DUTIES,<br />
COURT FEES, REGISTRATION FEES)<br />
Administrative fees and duties payment liability is stipulated<br />
under the Law on Administrative Fees and Duties ("Official Gazette<br />
of RM", No. 55/03 and 81/05). Amount of the republic stamp<br />
duties is determined under the stamp duty tariff, depending on nature<br />
of action or document for which the stamp duty is payable.<br />
Court fees payment liability is stipulated under the Law on Court<br />
Fees ("Official Gazette of RM", No. 76/05). The court fee is payable<br />
for actions and documents, undertaken in the court procedure.<br />
The amount of a court fee is determined under the stamp duty<br />
tariff and depends on complexity of an action under the court proceedings.<br />
The amount of stamp duty liability depends on nature of<br />
the court proceedings.<br />
Registration fees - Registration fees payment liability is stipulated<br />
under the Law on Business Companies ("Official Gazette of<br />
RM", No. 6/02). These fees are paid at the moment of registration<br />
of business companies with the Commercial Court. The amount of<br />
the registration fee is from 1 - 50 eur depending on nature of an activity<br />
or type of a company which is to be registered.<br />
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BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
13. CONCESSION CHARGES<br />
The concession charges are paid for use of natural resources of<br />
common interest and exercising public authorizations, i.e. charges<br />
for use of: forests; mineral resources; public roads; coastal zone; environment<br />
related charges; organization of games of chance. Payment<br />
of the above charges is regulated by a special legislation (Law<br />
on Forests; Law on Waters; Law on Mining Industry; Law on Coastal<br />
Zone; Law on Games of Chance, etc).<br />
14. LOCAL TAXES<br />
The municipalities, pursuant to powers vested in them under<br />
the Law on Financing of Local Self-Government ("Official Gazette<br />
of RM", No. 42/03 and 44/03) and according to relevant tax<br />
laws, may earn revenues on the basis of:<br />
- Local revenues (property tax, surtax on personal income tax,<br />
consumption tax, firm or trade name tax, tax on undeveloped building<br />
land;<br />
- Local fees (tourist tax, administrative fees and duties and municipal<br />
tax), and<br />
- Charges (charges for development of building land, charges<br />
for use of building land).<br />
Property tax - Property taxation is performed in accordance<br />
with the Property Tax Law ("Official Gazette of RM", No. 65/01),<br />
which was adopted at the end of 2001, and has been in force from<br />
January 2003, and by the Decree on Detailed Criteria and Methodology<br />
for Determination of Market Value of a Property<br />
("Official Gazette of RM", No. 23/03, 26/04 and 31/05). The tax rate<br />
ranges from 0,08% to 0,80% of a property market value, while its<br />
amount is determined by a municipality, according to its own specific<br />
characteristics.<br />
Surtax on Personal Income Tax -The tax is levied by a local<br />
self-government by its own regulation stemming from the Law on<br />
Financing of Local Self-Government. The surtax rate may be up to<br />
13% for municipalities and up to 15% for the Capital and Old Royal<br />
Capital, of a tax base which includes personal income tax.<br />
Consumption tax - The tax is levied by a local self-government<br />
by its own regulation stemming form the Law on Financing of Local<br />
Self-Government. The consumption tax is charged on sale of alcoholic<br />
and non-alcoholic beverages in catering facilities.<br />
The tax rate ranges up to 3% for municipalities or 5% for the Capital<br />
and Old Royal Capital. The taxpayer is a legal or natural person<br />
rendering catering services. The consumption tax rate includes<br />
sales price of a beverage excluding VAT and sales tax.<br />
persons who are personal income taxpayers or corporate income<br />
taxpayers and who are registered for performing business activities.<br />
The tax is paid in annual amount which is determined by a local<br />
self-government, but not exceeding the amount of 300 eur per<br />
a firm or trade name.<br />
Tax on gambling and entertainment games - The tax is levied<br />
by a local self-government by its own regulation based on the<br />
Law on Financing of Local Self-Government and a separate legislation<br />
. The separate legislations govern basic elements (taxpayer,<br />
tax base etc.), while the amount and manner of calculation and<br />
payment of such tax is determined by a local self-government under<br />
its enactment.<br />
Tourist tax - Tourist tax liability is regulated by the Law on<br />
Tourist Tax ("Official Gazette of RM", No.11/04 and 13/04).The<br />
amount of the tourist tax ranges from 0,10 eur to 0,80 eur, depending<br />
on a type of accommodation facility, favourable conditions<br />
and available services.<br />
The taxpayer is a person who uses accommodation services in a<br />
tourist or catering facility outside his place of residence.<br />
Administrative fees and duties - Administrative fees and duties<br />
liability is regulated under the Law on Administrative Fees<br />
and Duties ("Official Gazette of RM", 55/03 and 81/05), and by<br />
municipal regulations. The taxpayer is a person at whose request a<br />
procedure is instituted or an action is undertaken, for which the local<br />
administrative fees and duties are payable according to the<br />
stamp duty tariff.<br />
The amount of administrative fees and duties may not exceed<br />
the amount of a stamp duty payable for similar documents or actions<br />
instituted before the republic administration authorities.<br />
Municipal taxes *- The taxes are regulated by the Law on Municipal<br />
Taxes and Charges ("Official Gazette of RM", No.38/92,<br />
30/93, 3/94, 27/94 and 45/98). The Law sets forth types of rights,<br />
objects and services on which municipal taxes may be levied by a<br />
local self-government. The municipal tax is paid by a user of right,<br />
object or services, the use of which is subject to municipal tax liability.<br />
Local charges - Local charges liability is regulated by the Law<br />
on Building Land ("Official Gazette of RM", No.55/00) and by<br />
Law on Roads ("Official Gazette of RM", No. 42/04). The Law requires<br />
payment of charges for development and use of urban building<br />
land.<br />
Firm or trade name tax - The taxpayers are legal or natural<br />
* Draft Law on Gambling and Entertainment Games is under the Parliamentary procedure.<br />
* New draft Law on Local Municipal Taxes is under the Parliamentary procedure.<br />
17
Budget suficit<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Budget suficit<br />
The entire work of the Tax Administration and all of its segments,<br />
i.e. Sectors and Territorial Units is reflected in the final<br />
collection of taxes, contributions and other public revenues.<br />
We, in the Tax Administration, recognize cooperation with the<br />
taxpayers and voluntary compliance with the tax regulations, what is<br />
realized through the self-taxation principle. The self-taxation principle<br />
is accepted also in our tax legislation and represents a reflection<br />
of modern world trends in fiscal systems. It enables the taxpayer to<br />
file a tax return and calculate by itself the tax obligations for payments<br />
to be effected in compliance with the terms regulated by law.<br />
Pursuant to this pursuit, gross collection of taxes, contributions<br />
and other budgetary revenues was realized in 2005 to the amount of<br />
521.730.273eur.<br />
Taking into account that return of tax credits, several contributions<br />
paid, mistaken payments etc. are effected from the total realized<br />
collection, the net collection, following the determined returns<br />
reduction for 2005, amounts to 485.915.232eur.<br />
Therefore, aggregate gross collection was reduced by the amounts of<br />
VAT returns, i.e. by the amount of 35.815.041eur ( VAT 33.880.138 eur).<br />
In order to review the collection trend in the reporting period<br />
we did comparative analysis in relation to the collection realized<br />
in 2004<br />
Index of total collection growth in relation to the comparative<br />
period of the last year amounted to 116, what accounts for the<br />
increase in collection by 16% (tax collection was higher by 15% and<br />
contributions collection by 18%).<br />
Nominal values and tax and contributions growth show that:<br />
• Collection of taxes in the period January - December, 2005<br />
amounted to 308.907.000eur, and for the same period in 2004 it<br />
amounted to 268.436.000eur, what is by 15% higher,<br />
• Collection of contributions in the period January - December<br />
2005 amounted to 212.823.000eur, and for the same period of the<br />
last year it amounted to 179.939.000eur, what is by 18% higher.<br />
Income Tax collection was realized to the amount of<br />
90.075.000eur . In relation to the comparative period in 2004, collection<br />
of these revenues was higher by 3%. (In 2004, these revenues were<br />
collected to the amount of 87.042.000eur).<br />
Mirjana Pešalj<br />
In the structure of Income Tax collection, which was realized in<br />
the period from January to December, 2005, the Personal Income Tax<br />
collection makes 97% and amounts to 87.018.000eur. In relation to<br />
the comparative period, collection of this tax was higher by 7%. Such<br />
growth is conditioned by enhanced measures of collection, in the<br />
course of the whole year. The amount of 15.613.000eur was collected<br />
by the application of these measures. Growth of the Personal Income<br />
Tax collection was realized apart from the fact that physical persons<br />
tax rate was reduced by 10%.<br />
Collection of the Independent Activity Income Tax, in the structure<br />
of Income Tax collection, makes 2% and amounts to 1.892.000 eur.<br />
Independent Activity Income taxpayers are in most cases "small taxpayers;,<br />
who are provided with a special treatment in the course of arrears<br />
payment, by the Decree on collection of due and unpaid taxes<br />
and contributions and other public revenues.Tax arrears of taxi drivers,<br />
autotransporters and market-place sellers was"frozen,,.Therefore,<br />
only very small amounts of debt remained to be collected, collection<br />
of which could not contribute to the higher amount of collected income<br />
tax.<br />
Profit tax was collected to the amount of 23.485.000 eur, what was<br />
by 24% higher in relation to the comparative period in 2004 ( index<br />
124 ).This was the result of Profit Tax collection in accordance with tax<br />
returns (64%) and measures taken for the purpose of collection (36%).<br />
The collected amount of VAT (domestic market) in the period January<br />
- December 2005 was 94.729.000 eur, what is by 37% higher in<br />
relation to the comparative period (index 137). These revenues were<br />
generated to the amount of 31.626.000eur by measures taken for the<br />
purpose of collection ( 33% out of the total amount of collected VAT).<br />
Revenues from excises, in relation to the comparative period were<br />
higher by 2%. Revenues on the basis of excises on mineral oils, mineral<br />
oil products and substitutes, in the reporting period, were generated<br />
to the amount of 59.769.000eur, what makes 83,2 % revenues collected<br />
on excise taxes. In relation to the comparative period in 2004,<br />
these revenues were higher by 1,7 % .Revenues on the basis of excise<br />
on alcohol and alcoholic beverage in production were generated to<br />
the amount of 6.079.000eur, what was 8,5% out of the total collected<br />
revenues from excise tax. In relation to the comparative period in<br />
18
Budget suficit<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
2004, these revenues are higher by 40,6%. Revenues on the basis of excise<br />
on tobacco products in production were generated to the amount<br />
of 5.966.00eur, what was 8,3% out of the total revenues collected<br />
from excise tax. In relation to the same period in 2004, these revenues<br />
were lower by 21,7%. Excise on goods imported is the category, which<br />
is not under the competence of the Tax Administration.<br />
Fees for usage of natural resources of general interest were collected<br />
to the amount of 14.857.000 eur, what was by 123% higher in relation<br />
to the comparative period (index 223). These revenues were collected<br />
to the amount of 3.513.000 eur. by the measures taken for the<br />
purpose of collection.<br />
Category of the tax on goods and services turnover was cancelled<br />
by the application of the Value Added Tax. Collection realized in relation<br />
to the tax on turnover of used motor vehicles, vessels, airplanes<br />
and aircrafts was to the amount of 3.055.000 eur, collection of tax on<br />
insurance premiums was to the amount of 1.051.000 eur and it could<br />
not be compared to this type of collection in the previous year because<br />
on May 6, 2004 started application of the Law on Premium Insurance<br />
Tax, which stipulated the obligation to calculate and pay for<br />
this tax.<br />
Collected amount of the Real EstateTax was 5.148.000 eur.<br />
Tax on Real Estate Transfer is such type of tax which can not be<br />
influenced by the collection measures, apart from delinquent debt,<br />
because the taxpayer itself decides upon its property and its transfer.<br />
Therefore, comparison of collection of this tax in the reporting period<br />
to collection from the comparative period is not real.<br />
In relation to the comparative period, collection of pension and<br />
invalidity insurance was higher by 20 %, contributions for healthcare<br />
insurance by 15 % and contributions for unemployment insurance<br />
by 27 %.<br />
Collection of taxes on the level of Tax Administration and territorial<br />
units, in relation to the comparative period are presented in tables<br />
and graphics.<br />
in 000 eur<br />
TAXES PU PG NK BR<br />
Realized 2004. 268.436 138.669 30.546 8.881<br />
Realized 2005. 308.907 140.316 43.387 10.863<br />
Index 115 101 142 122<br />
TAXES BD HN BP BA PV<br />
Realized 2004. 11.396 70.051 2.768 2.748 3.377<br />
Realized 2005. 18.898 76.919 4.482 4.348 8.168<br />
Index 166 110 162 158 242<br />
Collection of contributions on the level of the Tax Administration<br />
and in the territorial units, in comparison to 2004, presented in<br />
tables and graphics. in 000 eur<br />
CONTRIBUTIONS PU PG NK BR<br />
Realized 2004. 268.436 138.669 30.546 8.881<br />
Realized 2005. 308.907 140.316 43.387 10.863<br />
Index 115 101 142 122<br />
CONTRIBUTIONS BD HN BP BA PV<br />
Realized 2004. 11.396 70.051 2.768 2.748 3.377<br />
Realized 2005. 18.898 76.919 4.482 4.348 8.168<br />
Index 166 110 162 158 242<br />
CONTRIBUTIONS COLLECTED IN THE TERRITORIAL UNITS<br />
IN 2005<br />
in 000eur<br />
TAXES COLLECTED IN THE TERRITORIAL UNITS IN 2005<br />
in 000eur<br />
Explanation: ( TA - Tax Administration, PG - Podgorica, NK -<br />
Nikšić, BR - Bar, BD - Budva, HN - Herceg Novi, BP - Bijelo Polje, BA -<br />
Berane, PV - Pljevlja ).<br />
Explanation: ( TA - Tax Administration, PG - Podgorica, NK -<br />
Nikšić, BR - Bar, BD - Budva, HN - Herceg Novi, BP - Bijelo Polje, BA -<br />
Berane, PV - Pljevlja )<br />
Tax Administration undertook activities to collect the tax arrears<br />
during 2005. The tax arrears were collected to the amount of<br />
107.032.000eur, i.e. taxes to the amount of 66.630.000eur, and<br />
19
Budget suficit<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
contributions to the amount of 40.402.000eur .<br />
In addition, in the period from January to December 2005 the<br />
Tax Administration reported to the Commercial Court claims for public<br />
revenues against 49 economic entities, which were in the bankruptcy<br />
procedure, to the amount of 3.589.361eur.<br />
TREND OF REALIZATION OF COLLECTION IN 2006<br />
In the course of January and February 2006, thanks to the efficiency<br />
of the Tax Administration officers, the collection growth<br />
trend continued. Therefore, Personal Income Tax collection was<br />
realized to the amount of 14.260.000 eur. In comaprison to January<br />
and February 2005, collection of these revenues was higher<br />
by 67.09% (when it was collected to the amount of<br />
8.534.000eur).<br />
Collection of Independent Activity Income Tax for I and<br />
II/2006 was realized to the amount of 220.000 eur. In comparison<br />
to the same period in 2005, collection of these revenes was higher<br />
by 7,84%. (for I and II 2005 it was collected to the amount of<br />
204.000eur) .<br />
Collection of Property Income Tax was realized to the amount of<br />
184.000 eur. In comparison to the same period in 2005, collection of<br />
these revenues was higher by 85,85% (for I and II 2005 it was collected<br />
to the amount of 99.000eur).<br />
Collection of Profit Tax was realized to the amount of 2.197.000<br />
eur. In comaprison to the same period in 2005, collection of these revenues<br />
was higher by 23,84%. In the comparative period,<br />
1.774.000eur of these revenues was collected.<br />
Collection of Value Added Tax was realized to the amount of<br />
20.819.000 eur. In comparison to the same period in 2005, collection<br />
of these revenues was higher by 26,28%. (for I and II 2005 it was collected<br />
to the amount of 16.486.000eur) .<br />
Collection of Turnover Tax was realized to the amount of 711.000<br />
eur. In comparison to the comparative period in 2005, collection of<br />
these revenues was higher by 53,89%. In the comparative period these<br />
revenues were collected to the amount of 462.000eur .<br />
Collection of Excise Tax, was realized to the amount of<br />
9.280.000eur. In comparison to the comparative period in 2005,<br />
collection of these revenues was higher by 5,89% (for I and II<br />
2005 these revenues were collected to the amount of<br />
8.763.000eur).<br />
Collection of Real Estate Transfer Tax was realized to the amount<br />
of 905.000eur. In comparison to the comparative period in<br />
2005, collection of these revenues was higher by 86,21%. In the<br />
comparative period these revenues were collected to the amount of<br />
486.000eur.<br />
Collection of revenues on the basis of concessions was realized to<br />
the amount of 1.208.000 eur. In comparison to the same period in<br />
2005, collection of these revenues was higher by 23% (for I and II<br />
2005 it was collected to the amount of 976.000eur ).<br />
Therefore, gross tax collection for the first two months in 2006<br />
was realized to the amount of 49.784.000 eur. In comparison to the<br />
same period in 2005, the realized collection was higher by 31%, when<br />
it was collected to the amount of 37.784.000eur.<br />
Collection of revenues on the basis of contributions for the first<br />
two months in 2006 was realized to the amount of 28.295.000 eur.<br />
In comparison to the same period in 2005, collection of these revenues<br />
was higher by 38%. (for I and II 2005 it was collected to the<br />
amount of 20.372.000eur).<br />
GROSS COLLECTION - REALIZATION JAN-FEB 2005 AND<br />
REALIZATION JAN-FEB 2006<br />
in 000eur<br />
PLP PPSD PPI PD PDV<br />
OstvarenoI-II 05. 8.534 204 99 1.774 16.486<br />
OstvarenoI-II 06. 14.260 220 184 2.197 20.819<br />
Index 167,09 107,84 185,85 123,84 126,28<br />
PP A K PN D<br />
OstvarenoI-II 05. 462 8.763 976 486 20.372<br />
OstvarenoI-II 06. 711 9.280 1.208 905 28.295<br />
Index 153,89 105,89 123,77 186,21 138,89<br />
Explanation: (PIT - Personal Income Tax, IAIT - Independent Activity<br />
Income Tax, TPI - Tax on Property Income, PT - Profit Tax, VAT -<br />
Value Added Tax, TT - Turnover Tax, E - Excise, RET - porez na nepokretnost,<br />
C - Contributions).<br />
In the Tax Administration - Sector for implementation of collection<br />
operates Centralized Collection Center, which activities are directed<br />
towards a faster and more efficient due diligence on delinquent<br />
taxpayers and accounts as well as notifying the taxpayers about<br />
the tax due on the basis of: Profit Tax, Value Added Tax and Fees on<br />
the basis of usage of natural resources (concessions) as well as notifying<br />
the taxpayers, who did not comply with the payment dynamics<br />
envisaged by the Agreement on Tax Obligations Restructuring. Apart<br />
from that, the taxpayers are kept informed if they fail to file tax returns<br />
in due time.<br />
Delinquent taxpayers are registered on the basis of report from<br />
the Tax Administration information system. Registration includes<br />
individual "processing" of all taxpayers from the list. Procedure of<br />
''Processing'' implies that before contact with the taxpayers, officers<br />
provide for all necessary data (analysis of analytical cards according<br />
to all types of taxes and contributions) on the taxpayers debt status.<br />
In the everyday work activities, the Tax Administration makes<br />
efforts to recognize the fiscal system, in which the taxpayers will<br />
comply with the tax laws and file their tax returns in due time. However,<br />
there is still certain number of taxpayers, who do not file<br />
their tax returns, in this tax system development phase. Therefore,<br />
they do not settle their debts in the prescribed terms. The tax authority<br />
is then obliged to take action in order to provide for delinquent<br />
tax returns.<br />
Providing for delinquent tax returns is done by notifying the taxpayer<br />
that he failed to file a tax return (through phone, written notification<br />
and in certain cases by means of personal delivery).<br />
During 2005 on average, 8.882 VAT returns were filed monthly<br />
(106.587/12 =8.882), i.e. 79% of the average number of taxpayers registered<br />
for VAT ( 135.364/12=11.280).<br />
20
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BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
During 2005 on average, 100 excise returns were filed monthly<br />
(1.204/12 = 100), i.e.79% of the average number of registered excise<br />
taxpayers (1.528/ 12=127).<br />
Problem faced by the Tax Administration with continuity in the<br />
procedure of providing for delinquent returns, represented in the<br />
graphic for the territorial unit Budva, is that certain number of taxpayers<br />
deems they are not obliged to file tax returns in the periods<br />
when they do not do business. In that way they neglect the legal obligation<br />
to file tax return with zero tax amount.<br />
Growth trend of the VAT and Excise tax returns filed is presented<br />
through comparative data of the last month in the reporting period<br />
for 2005 -November '05 and the first month in the reporting period<br />
for 2006 - December '05.<br />
Monthly returns are to be filed until 15th in the month for the<br />
previous month. For that reason annual report on returns begins<br />
with December of the previous year and ends with November of the<br />
current year.<br />
Type Last month in the First month in the index<br />
of filed reporting period for reporting period<br />
tax return 2005 2006<br />
-November 2005 - December 2005.<br />
VAT 11.808 11.976 101,42<br />
EXCISES 137 141 102,92<br />
On the basis of the given data we can state that one of the priority<br />
tasks of the Tax Administration is to take action in order to provide<br />
for delinquent tax returns.<br />
Tax Administration territorial units implement with continuity<br />
measures in order to provide for monthly delinquent tax returns<br />
(VAT and Excises). Their effect can not be seen straight away, in particular<br />
due to the relatively short term, i.e. monthly term to take these<br />
measures. Hovewer, the growth tendency in the number of taxpayers,<br />
who comply with tax regulations, i.e. "volunatarily" file tax returns,<br />
is encouraging and represents a stimulus for work in the territorial<br />
units of the Tax Administration.<br />
Primary task of the Tax Administration is to take measures to<br />
provide for delinquent tax returns, having in mind that the taxpayer,<br />
who fails to file tax return, is a potential delinquent taxpayer, i.e "defaulter".<br />
Successful coordination of the sectors of Head Office and territorial<br />
units brings about realization of the everyday basic working task<br />
and strategic goal of the Tax Administration:<br />
• o efficient and effective implementation of public revenues<br />
collection<br />
Director, Tax Administration<br />
MIRJANA PEŠALJ<br />
21
Tax administration<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Tax administration<br />
Introduction<br />
The Tax Administration was established by the Decree of the Government of the Republic of Montenegro of August 2003, instead<br />
of the previous Public Revenues Directorate, as an authority whose primary function is collection of public revenues and ensuring<br />
regular inflow of the Republic Budgetary funds.<br />
Taking into account importance of the activities that are under its immediate competence, the Tax Administration has inter alia<br />
paid special attention to improvement of its organization and professional and personnel consolidation over the last year and a<br />
half. To this end, observing the legally binding requirement concerning downsizing of the public administration employees, the<br />
Government of the Republic of Montenegro adopted in December 2004 a new enactment on systematization and reorganization<br />
of work posts.<br />
The Tax Administration currently has 626 full-time permanent employees, about 30 employees in temporary employment or<br />
with whom temporary working contracts are concluded and 31 trainees with university degree.<br />
DIRECTOR<br />
SECTOR FOR PAYMENT<br />
ENFORCEMENT<br />
INTERNAL CONTROL<br />
DEPARTMENT<br />
BAR<br />
BUDVA<br />
ULCINJ<br />
TIVAT<br />
TAX PAYERS SERVICE AND<br />
REGISTRATION SECTOR<br />
CONTROL AND<br />
COLLECTION<br />
EFFECTS MONITORING<br />
DEPRATMENT<br />
HERCEG NOVI<br />
NIKŠIĆ<br />
KOTOR<br />
ŠAVNIK<br />
PLUŽINE<br />
SECTOR FOR TAX<br />
REGULATIONS<br />
MONITORING AND INSPEC-<br />
TION CONTROL<br />
PERSONNEL, TECHNICAL<br />
AND ADMINISTRATIVE<br />
SERVICE<br />
PODGORICA<br />
DANILOVGRAD<br />
CETINJE<br />
SECTOR FOR TAX RETURN<br />
RECEPTION AND PROCES-<br />
SING,<br />
INCOME ACCOUNTING<br />
AND IS<br />
ECONOMIC AND<br />
FINANCIAL<br />
AFFAIRS SERVICE<br />
BIJELO POLJE<br />
MOJKOVAC<br />
KOLAŠIN<br />
ANDRIJEVICA<br />
BERANE<br />
PLAV<br />
ROŽAJE<br />
PLJEVLJA<br />
ŽABLJAK<br />
22
Tax administration<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
The above employees work in the Head Office and eight<br />
Branch Offices: Podgorica, with Branches in Cetinje and Danilovgrad,<br />
Nikšić, with Branches in Plužine and Šavnik, Budva,<br />
with Branch in Tivat, Herceg Novi, with Branch in Kotor, Bar,<br />
with Branch in Ulcinj, Bijelo Polje, with Branches in Mojkovac<br />
and Kolašin, Berane with Branches in Andrijevica, Plav and Rožaje<br />
and Pljevlja, with Branch in Žabljak.<br />
Functional organization of the Tax Administration Head Office<br />
is composed of: four Sectors- Sector for Registration and<br />
Taxpayers Services, Sector for Tax Return Reception and Processing,<br />
Income Accounting and Information System, Sector for Tax<br />
Regulations Implementation Monitoring, Inspection Supervision<br />
and Administrative Procedure and Sector for Payment Enforcement;<br />
two Departments- Department for Control and Collection<br />
Effects Monitoring and Human Resources Development<br />
and Department for Internal Control; and two Services: Personnel,<br />
Legal, Technical and Administrative Service and Economic<br />
and Financial Affairs Service.<br />
The Tax Administration is headed by the Director, while the<br />
Management Team, composed of Assistant Directors, who are<br />
also Chiefs of Sectors, Departments and Services or Branch Office<br />
Executives, helps the Director in the process of management<br />
and discharging of the duties.<br />
Competence, efficiency, professionalism and transparency<br />
are the main principles which have been consistently followed<br />
by this Administration, both in performing regular activities and<br />
tasks and in relation with taxpayers, citizens and the public in<br />
general.<br />
Efficient collection has been a strategic aim of the Tax Administration,<br />
which also implies efficient control of the taxpayers.<br />
Offering fast and high-quality services to the taxpayers and citizens<br />
and prompt recording of identified liabilities arising from<br />
the public revenues are prerequisites for successful realization of<br />
the said activities.<br />
Results achieved by the Tax Administration last year and early<br />
this year in all areas of its operations and competences, which<br />
were reflected in exceptional collection of source budgetary revenues<br />
and budgetary surplus, speak in favour of successful<br />
functioning and coordination of the above organizational segments.<br />
Important fact is that the automatic data processing has<br />
been in place in the Administration, while the Information System<br />
covering all municipalities in the territory of Montenegro<br />
has a direct connection with the Central Bank of Montenegro<br />
through «mip-net» network. The Tax Administration thus provides<br />
accurate and precise data and information both for its own<br />
purposes and for the Ministry of Finance and other governmental<br />
agencies and institutions. Since last year, the Tax Administration<br />
Information System has been actively applying “Revenue<br />
Gordana Stajčić<br />
Model” and ”Manual Order” Project, while another important<br />
and complex model- “Consolidated Collection” is expected to be<br />
implemented in the course of this year.<br />
Special attention within the Tax Administration has been<br />
paid to education of both its employees and the taxpayers. In<br />
addition to training courses organized jointly with foreign consulting<br />
firms, the Tax Administration also organizes training<br />
courses by itself, through highly successful lectures, seminars<br />
and presentations.<br />
Since September 2003, the Tax Administration has been a<br />
member of the Intra-European Organization of Tax Administrations<br />
(IOTA), in the framework of which its representatives have<br />
active participation through area-groups. One of the most frequent<br />
topics discussed in the workshops, which is of paramount<br />
importance for our tax system is “VAT Frauds and Money Laundering”.<br />
In the course of last year, the Tax Administration concluded<br />
agreements on co-operation with the Union of Employers and<br />
Montenegro Business Alliance in order to establish as good<br />
communication with the taxpayers as possible and to improve<br />
the tax discipline and compliance with legal regulations in the<br />
area of tax policy through joint activities and conformity with<br />
legal regulations.<br />
In order to provide education and training of young staff,<br />
the Tax Administration also signed Agreements on Co-operation<br />
with the Faculties of Economics and Law of the University of<br />
Montenegro.<br />
Chief of the cabinet<br />
GORDANA STAJČIĆ<br />
23
Public debt<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Report on public debt<br />
of Montenegro<br />
as of 31 December 2005<br />
1. AMOUNT AND STRUCTURE<br />
OF PUBLIC DEBT OF<br />
MONTENEGRO<br />
Public debt of Montenegro amounted to<br />
EUR 700,4 million as of 31 December 2005.<br />
Domestic debt amounted to EUR187,1 million<br />
or 26,7% of total debt, while foreign debt<br />
amounted to EUR 513,3 million or 73,3% respectively.<br />
It is primarily due to ongoing negotiations<br />
and allocation of debt , ongoing<br />
negotiations on succession of the former<br />
SFRY and impossibility to quantify explicit liabilities<br />
assumed under the Law on Restitution<br />
of Expropriated Property Rights and<br />
Compensation that this amount has not<br />
been fully clear-cut. According to current estimations,<br />
no great divergences are likely to<br />
arise following conclusion of negotiations on<br />
allocation of the financial assets and liabilities<br />
with the Republic of Serbia.<br />
Table 1. Amount and structure of public<br />
debt of Montenegro in the period from<br />
2002-2005.<br />
Source: Ministry of Finance<br />
In 2002, public debt amounted over<br />
EUR 1 billion. It is amount which was determined<br />
prior to debt rescheduling with the<br />
International Bank for Reconstruction and<br />
Development and Paris Club creditors and<br />
prior to final agreement with Serbia concerning<br />
liabilities to the London Club creditors.<br />
The largest portion of the public debt<br />
of Montenegro is related to inherited longterm<br />
liabilities of the old system (ex SFRY<br />
and FRY). This portion particularly relates<br />
to foreign debts assumed by the Law on<br />
Regulation of Liabilities and Claims arising<br />
out of Foreign Debt and Foreign Savings of<br />
Citizens, which, at the end of 2005, amounted<br />
to EUR 435,5 million or 62,5% of<br />
the public debt, i.e. mostly loans extended<br />
by the International Bank for Reconstruction<br />
and Development and Paris Club creditors.<br />
Namely, except for credit arrangements<br />
with the international financial organizations<br />
(IMF, IBRD etc.) and intergovernmental<br />
credit arrangements of the<br />
SFRY, major portion of foreign debt contracted<br />
by banks and enterprises, was their<br />
commercial debt which was not guaranteed<br />
by the SFRY and National Bank of Yugoslavia<br />
(NBY). Starting from 1983 when<br />
SFRY, due to lack of foreign currency,<br />
accepted the process of multilateral rescheduling<br />
and refinancing of its foreign debt<br />
liabilities, the total foreign debt (including<br />
new foreign loans which were then being<br />
contracted) has been guaranteed by the<br />
SFRY and NBY, becoming thus a potential<br />
public debt. This debt includes allocated<br />
debt payable by beneficiaries of foreign<br />
loans from the Republic of Montenegro<br />
and a portion (5,88%) of non-allocated<br />
debt contracted or guaranteed by ex SFRY,<br />
or assumed by FRY (36,52% of non-allocated<br />
debt of the SFRY).<br />
In addition to old foreign debts, the<br />
"inherited" public debt also covers liabilities<br />
arising out of old foreign currency savings,<br />
which were assumed under the said<br />
Law. The liabilities arising out of old foreign<br />
currency savings amounted to: EUR<br />
127 million at the end of 2003; EUR 123<br />
million at the end of 2004 and EUR 117<br />
million at the end of 2005, which accounts<br />
for 16,8% of the public debt. Therefore, at<br />
the end of 2005, inherited long-term liabilities<br />
from the old system account for<br />
79,3% of the total public debt of Montenegro.<br />
Remaining portion of 20,7% includes:<br />
new debts contracted in the period<br />
from 2000-2005; liabilities arising out of<br />
short-term loans; credits; T-bills; debt contracted<br />
by local self-governments and outstanding<br />
budgetary liabilities.<br />
2. EXTERNAL PUBLIC DEBT<br />
External public debt amounted to EUR<br />
513,3 million., out of which "old" debt accounted<br />
for EUR 435,5 million or 84,9%,<br />
and new one amounts to EUR 77,9 million<br />
or 15,1%. The debt was reduced by about<br />
50% at the end of 2002, when negotiations<br />
were concluded with major creditors- the<br />
International Bank for Reconstruction and<br />
Development, Paris Club creditors and Re-<br />
1 - Prema Mastrihtskom kriterijumu u iznos javnog duga ne ulaze dugovi javnih preduzeća, uključujući one za koje je garancije dala država, osim ako nije izvjesno da će ti dugovi<br />
biti plaćeni iz budžeta države ili se već plaćaju, kao što je slučaj sa kreditom EIB za Luku Bar u iznosu od 6 miliona eura. U Annex-u 1 je dat pregled svih državno garantovanih<br />
zajmova javnim preduzećima.<br />
2 - Komisija za podjelu zajedničke imovine, formirana shodno članu 20 Zakona o sprovođenju Ustavne povelje DZ SCG, koja vrši i podjelu pasive NBJ još nije završila konačnu<br />
podjelu inostranog duga (nealociranog i dijela alociranog inostranog duga) između Srbije i Crne Gore.<br />
24
Public debt<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
public of Serbia concerning releasing of<br />
Montenegro from obligations to the London<br />
Club creditors on the basis of debt<br />
buy-back by Montenegro in early 1990-<br />
ties. Public debt share in the GDP, which<br />
indicates a level of external indebtedness,<br />
reached 68,7% prior to debt rescheduling,<br />
decreasing to 31,3% at the end of 2005.<br />
Table 2: Montenegrin Foreign Debt<br />
Trends in the period from 2000-2005<br />
Source: Ministry of Finance of Montenegro<br />
Table 3 shows a structure of foreign<br />
debt to creditors<br />
Table 3. Structure of foreign debt of<br />
Montenegro as of 31.December 2005<br />
As indicated in the Table above, the largest<br />
portion of the external public debt of<br />
Montenegro at the end of 2005 is old refinanced<br />
debt to the World Bank - 52,2%, or<br />
EUR 267,9 million. The old debt to the<br />
World Bank was refinanced in 2001 in the<br />
framework of regulation of relations with<br />
this institution. It was agreed that the debt<br />
should be refinanced through six consolidation<br />
loans. Repayment period of the loans is<br />
30 years, with 3 years of grace period, "favourable"<br />
interest rate - LIBOR and fixed<br />
spread. FRY is the Borrower, while the<br />
member states are beneficiaries of the loans,<br />
which issued the FRY counter-guarantees.<br />
Debt to the Paris Club amounted to<br />
EUR 151,6 million as of 31 December 2005,<br />
which is an amount reduced by a write-off<br />
of 51% in the first phase. Upon expiration<br />
of a three year arrangement with the IMF<br />
and obtaining positive mark for macroeconomic<br />
trends in Montenegro, it was expected<br />
that in March 2005 the debt to the Paris<br />
Club would be reduced by remaining<br />
15% or about EUR 26 million (according to<br />
negotiated debt write-off by 66%). However,<br />
due to default in obligations by the Republic<br />
of Serbia, such reduction did not take<br />
place within projected deadline. Such reduction<br />
is expected to take place in early<br />
2006, following successful completion of<br />
the arrangement. Old or refinanced debts<br />
also include liabilities to the Council of Europe<br />
Bank and International Finance Corporation<br />
(IFC) as well as outstanding debts<br />
to the Polish Bank Handlowy and Anglo Yugoslav<br />
Bank.<br />
Minor portion of external long-term liabilities<br />
is related to borrowings following<br />
2001, when Montenegro, as a part of the<br />
FRY or State Union of Serbia and Montenegro,<br />
regulated its membership and relations<br />
with the international financial institutions<br />
and concluded new arrangements. Newly<br />
contracted and simultaneously drawn foreign<br />
loans amount to EUR 77,9 million concluding<br />
with 31 December 2005. These<br />
loans include borrowings with: the World<br />
Bank under the IDA terms i.e. interest-free<br />
25
Public debt<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
loans; European Investment Bank; European<br />
Bank for Reconstruction and Development;<br />
European Community and German<br />
Bank for Reconstruction (KfW).<br />
2. INTERNAL PUBLIC DEBT<br />
Internal public debt of Montenegro<br />
includes: liabilities arising out of old foreign<br />
currency savings; liabilities arising<br />
out of borrowings from local financial and<br />
other institutions; liabilities resulting from<br />
issued short-term T-bills; debt contracted<br />
by local self-governments and outstanding<br />
budgetary payments.<br />
Table 4. Structure and amount of<br />
internal public debt<br />
3. INDICATORS OF<br />
INDEBTEDNESS OF<br />
MONTENEGRO -<br />
CONCLUDING REMARKS<br />
Table below shows standard indicators<br />
of indebtedness, calculated on the basis of<br />
the above and currently available data.<br />
Table 6. Indicators of indebtedness of<br />
Montenegro for 2004<br />
Gross Public Debt, in mil. EUR 700,4<br />
External Public Debt, in mil. EUR 513,3<br />
Gross Public Debt/GDP 42,7%<br />
External Public Debt/GDP 31,3%<br />
Source: Ministry of Finance<br />
M.Econ. Nikola Vukićević<br />
Source: Ministry of Finance<br />
It is evident that borrowing on the<br />
basis of T-bills is reduced, while debt<br />
from bank credits is fully removed.<br />
Accordingly, borrowing on the basis of<br />
T-bills amounted to EUR 8,0 million or<br />
by EUR 29,4 million less comparing to<br />
end 2004, while debt from bank credits<br />
amounting EUR 8,9 million at the end of<br />
2004 was fully repaid. About EUR 6 million<br />
of old foreign currency savings<br />
bonds was repaid, which is less than as<br />
planned under the annual Budget Law -<br />
EUR 8,7 million. Liabilities arising out of<br />
outstanding budgetary payments were<br />
reduced by EUR 20 million, while total<br />
local self-governments' debt was reduced<br />
by about EUR 2 million. Domestic debt<br />
was less by EUR 67 million totally comparing<br />
to debt amount as of 31<br />
December 2004.<br />
3 - Prema projekciji Deutsche Bank Research<br />
According to originally used methodology<br />
of the World Bank (Debt Reporting<br />
System), a share of external debt in Gross<br />
Domestic Product which is less than 30%<br />
indicates less indebted country; from 30%<br />
to 50% indicates moderately indebted<br />
country (Montenegro having 31,3%, is at<br />
the lower margin of moderately indebted<br />
countries); and share over 50% indicates a<br />
severely indebted country. For comparison<br />
purposes, at the end of 2004, in some countries<br />
in transition, such indicator was as follows:<br />
Bulgaria 57,6%; Czech Republic 37,4%;<br />
Croatia 79,9%; Lithuania 43,2%; Hungary<br />
59,0%; Romania 39,8%; Slovenia 50,1%.<br />
Taking into account further reduction of<br />
debt to the Paris Club, constraints on further<br />
borrowing and stabile GDP growth, it is<br />
likely that Montenegro will be included<br />
among less indebted countries in future.<br />
With respect to GDP for 2005, gross<br />
public debt of Montenegro accounted for<br />
42,7% at the end of 2005. It is significantly<br />
less than identified fiscal criterion and<br />
maximum public debt allowed by the EU,<br />
whereby Montenegro meets one of the<br />
two Maastricht criteria.<br />
According to the following two indicators,<br />
given in the Table above (external<br />
public debt/ export and repayment of foreign<br />
debt/ export), Montenegro is classified<br />
as a less indebted country. Namely,<br />
share of external public debt in total<br />
export in Montenegro accounts for 80,7%,<br />
which is significantly less than marginal<br />
value (165%), separating less indebted<br />
countries from moderately indebted countries.<br />
Level of indebtedness or proportion<br />
of foreign debt repayment and total export<br />
in Montenegro is 3,7%, which is also significantly<br />
less than a limit for moderately<br />
indebted countries which is set as 10%.<br />
Coordinator, Debt Management<br />
Department<br />
NIKOLA VUKIĆEVIĆ, M.Econ.<br />
26
World Bank and<br />
Relations with the WB<br />
The World Banks (WB) was founded in<br />
1944 as an International Bank for Reconstruction<br />
and Development (IBRD).<br />
Its original mission was to finance the reconstruction<br />
of nations devastated by the World<br />
War II and at that moment it had 38 members.<br />
The number has been increased to current<br />
184 members. The World Bank is present<br />
in 100 countries, having 10.600 employees<br />
world wide.<br />
World Bank Group consists of five closely<br />
associated institutions:<br />
1. The International Bank for Reconstruction<br />
and Development (IBRD) offers loans to<br />
mid-income countries. The funds for this lending<br />
come primarily from the issuing of its<br />
bonds on the global capital markets.<br />
2. International Development Association<br />
(IDA) offers assistance to the poorest<br />
countries with a per capita income of less<br />
than US$ 885, by providing interest-free<br />
loans, technical assistance and policy advices<br />
on national economy management. .<br />
3. International Finance Corporation<br />
(IFC) promotes growth in member countries<br />
through private sector and real investments.<br />
4. Multilateral Investment Guarantee<br />
Agency (MIGA) promotes the flow of foreign<br />
direct investment among member countries<br />
by insuring investors against non-commercial<br />
(political) risk, and by providing promotional<br />
and advisory services to help member<br />
countries create an attractive investment climate.<br />
5. The International Centre for Settlement<br />
of Investment Disputes (ICSID) provides<br />
facilities for conciliation and arbitration<br />
of investment disputes between Contracting<br />
States and nationals of other Contracting States.<br />
Ex-SFRY was a member country of all<br />
these five affiliations of the World Bank<br />
Group.<br />
International Bank for Reconstruction<br />
and Development (IBRD) was founded in<br />
1944 at the Bretton Woods Conference simultaneously<br />
with the International Monetary<br />
Fund. Yugoslavia was one of the 38 founding<br />
countries of the two international financial<br />
organizations. Upon signing documentation<br />
in Washington on 27 December<br />
1945, Yugoslavia formally joined the Bank<br />
and Fund.<br />
Following break up of former SFRY, manner<br />
of refinancing of outstanding liabilities<br />
resulting from previously used loans was<br />
agreed upon for the SRY.<br />
On 25 February 1993, the Board of Executive<br />
Directors of the International Bank for<br />
Reconstruction and Development adopted<br />
the Resolution No. 93-2, regulating the question<br />
of cessation and succession of the SFRY<br />
membership to this institution, according to<br />
which SRY participates with 36,52% in share<br />
of capital.<br />
State Union Serbia and Montenegro renewed<br />
membership to the World Bank in<br />
May 2001.<br />
Relations with World Bank<br />
Jadranka Radunović<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Regulation of outstanding liabilities to<br />
the IBRD has opened a perspective for new<br />
borrowing. Serbia and Montenegro, as a<br />
country highly burdened with debts, was<br />
granted the IDA status in period from 2001-<br />
2004, enabling it to contract debts with the<br />
International Development Association<br />
(IDA) under favourable terms<br />
Review of Financial Arrangements<br />
with the World Bank<br />
Following renewal of the membership,<br />
the World Bank has approved Montenegro<br />
credit funds for macroeconomic stability,<br />
market economy development and implementation<br />
of infrastructure projects.<br />
In addition to contacts with the WB representatives<br />
stemming from the above financial<br />
arrangements, representatives of the<br />
Government of the Republic of Montenegro<br />
held meetings in March 2004 with the International<br />
Finance Corporation (IFC), in Istanbul<br />
concerning unsettled claims of beneficiaries<br />
of other IFC loans from the territory of<br />
the Republic of Montenegro. It was agreed,<br />
inter alia, that the Government should assume<br />
unsettled claims of legal persons to the<br />
IFC, and that the IFC should write-off outstanding<br />
debt interest, including default interest.<br />
It was also agreed that the consolidated<br />
debt - other IFC loans should be settled<br />
by conversion of part of the debt into 10% of<br />
share capital of the Podgorička banka, while<br />
the remaining part of the debt should be<br />
paid in 18 semiannual installments in a way<br />
specified under the Agreement between the<br />
Government and the IFC signed in mid April<br />
2005.<br />
Two credits extended by the World Bank<br />
to Serbia and Montenegro in the previous<br />
period are particularly noteworthy: Structural<br />
Adjustment Credit I and Structural Adjustment<br />
Credit II.<br />
The SAC I amounting USD 15 million was<br />
approved to Montenegro in 2002 for the<br />
purpose of providing support to reforms in<br />
various fields, whose middle-term objective<br />
was establishing macroeconomic stability,<br />
stimulating growth and improving social situation.<br />
This credit was fully realized.<br />
The SAC II was approved to Serbia and<br />
Montenegro in 2004. USD 18 million of credit<br />
funds were allocated for the Republic of<br />
Montenegro. The credit is intended for the<br />
reform of financial, pension and healthcare<br />
system, including other areas as well. Delegation<br />
of the World Bank set conditions which<br />
are to be met for the realization of the credit,<br />
relating to implementation of reforms in the<br />
said fields. Planned reforms in the financial<br />
sector will enhance transparency of overall financial<br />
sector; and strengthen institutional<br />
capacity and accountancy of key public sec-<br />
27
Relations with World Bank<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
tor institutions. In December 2004, the first<br />
tranche of the SAC II credit funds was disbursed<br />
by the IDA to Montenegro.<br />
Disbursement of the second tranche of<br />
the SAC II has been postponed until the end<br />
of the first half of 2006, when the only one<br />
unfulfilled condition required for the realization<br />
of the SAC II second tranche is expected<br />
to be met: signing of an agreement on electric<br />
energy supply between new owner of the<br />
Aluminum Plant -Solomon Enterprise Limited<br />
and Montenegrin Electric Power Company<br />
Inc, Nikšić.<br />
WB Country Assistance Strategy for<br />
period 2005-2007<br />
World Bank adopted the Country Assistance<br />
Strategy for Serbia and Montenegro for<br />
FY 2005-2007 with the aim of supporting the<br />
EU Stabilization and Association Process as<br />
well as the Poverty Reduction Strategy process.<br />
The Country Assistance Strategy (CAS) is<br />
aimed at promoting economic growth and<br />
development by means of: creating a smaller,<br />
more sustainable and efficient public sector;<br />
creating larger and more dynamic private<br />
sector; reducing the poverty level and improving<br />
social security and access to public services.<br />
Under the World Bank CAS for Montenegro,<br />
the following funds are envisaged for<br />
2006:<br />
" Level "base case": for development of<br />
tourism and agriculture, the credit amounting<br />
USD 12 million (6 million IDA, 6 million<br />
IBRD) and for the Regional Energy Project,<br />
the credit amounting USD 3 million (IDA)<br />
" Level "high case": for development of<br />
tourism and agriculture, the credit amounting<br />
USD 15 million (6 million IDA, 9 million<br />
IBRD) and for the Regional Energy Project<br />
World Bank<br />
USD 3 million (IDA)<br />
Identified areas that currently represent<br />
obstacle for the development of Montenegro,<br />
where the World Bank may offer its assistance<br />
either by providing credit funds or expert<br />
assistance for related reforms are as follows:<br />
- Infrastructure - waterworks and roads,<br />
representing obstacle for tourism development,<br />
- Regional energy market as the World<br />
Bank project<br />
- Pension system and further reforms -<br />
already launched using existing credit<br />
- Healthcare system and further reforms<br />
- already launched using existing credit<br />
- Reform of judiciary<br />
In the negotiations with the World Bank<br />
representatives, possibility for the Central<br />
Bank of Montenegro to become certified to<br />
conduct transactions with the World Bank is<br />
under consideration. In addition to promoting<br />
the very institution, the transaction<br />
costs would be significantly cut, given the reduced<br />
number of intermediaries. The WB representatives<br />
were advised to consider possibility<br />
of opening a WB Office in Montenegro<br />
(in addition to the existing Office in Belgrade)<br />
for the purpose of establishing a higher<br />
quality co-operation and exchange of information<br />
with the World Bank. For the time<br />
being, the only representative of the World<br />
Bank works with the Central Bank of Montenegro.<br />
Sector for Economy, Finance,<br />
International Co-operation<br />
and Games of Chance System<br />
JADRANKA RADUNOVIĆ, Coordinator,<br />
International Co-operation Department<br />
28
State aid<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
State aid<br />
With future signing of the Stabilization<br />
and Association<br />
Agreement (SAA), obligation<br />
to harmonize national legislation with<br />
the EU regulations enters into force,<br />
including adoption of a Law on State<br />
Aid Control which is to be adopted by<br />
the Parliament of Montenegro. Upon<br />
adoption of the Law, a single regulation<br />
will be introduced in the state aid field,<br />
based on principles of market economy,<br />
with the aim of maintaining competition<br />
and meeting internationally assumed<br />
obligations.<br />
The Ministry of Finance, together<br />
with expert assistance from the PLAC<br />
(Policy and Legal Advice Center, the EU<br />
financed project) consultants, has been<br />
working on a Draft Law on State Aid<br />
Control, the adoption of which is scheduled<br />
for the second quarter of 2006<br />
under the Government Agenda. The<br />
Draft Law has also been submitted to<br />
the European Commission, which positively<br />
marked both the Law and progress<br />
achieved in the field of creating and introduction<br />
of regulations in the area of<br />
state aid in Montenegro.<br />
The fact is that single regulatory framework<br />
in the field of state aid has been<br />
in place in the EU for many years. Upon<br />
implementation of the regulatory and<br />
institutional framework for state aid<br />
control in Montenegro, earlier practice<br />
will cease to exist, according to which<br />
granting of the state aid has been governed<br />
by individual enactments, with no<br />
precise conditions and rules for its preparation<br />
and allocation, and with no<br />
mechanisms of control for granting, use,<br />
subsequent approval and recovery of the<br />
state aid.<br />
Therefore, by adoption of the Law on<br />
State Aid Control, general conditions<br />
and rules for preparation, granting, control<br />
of granting and use, subsequent approval<br />
and recovery of state aid will be<br />
defined, which will enable: phasing out<br />
of any kind of state aid that distorts or<br />
threatens to distort competition by giving<br />
advantage to certain companies or<br />
products, which is assessed according to<br />
the rule on competition in the EU (Articles<br />
81,82,86,87 of the Treaty on European<br />
Union); establishing of an independent<br />
operational agency authorized for<br />
supervision and control of the procedure<br />
related to granting and use, subsequent<br />
approval and recovery of state<br />
aid, which will be empowered to assess<br />
programs and individual state aids and<br />
to order recovery of unlawful state aid.<br />
Establishing of a transparent system<br />
of state aid control also has positive effects<br />
by itself with respect to economic<br />
policy making, rational planning of the<br />
state budget and budget deficit management,<br />
easier reporting and efficient cooperation<br />
with international institutions<br />
with which Montenegro has financial<br />
arrangements, as well with respect<br />
to making appropriate industrial policies<br />
and regional development policies.<br />
In favour of transparency in the field of<br />
state aid, in compliance with the European<br />
Commission recommendations,<br />
the Ministry of Finance submitted the<br />
first Report on Inventory of State Aid in<br />
the Republic of Montenegro to the<br />
Commission in August 2005. The Report<br />
on Inventory of State Aid in the Republic<br />
of Montenegro covers all direct state<br />
subventions paid from the budget of<br />
the Republic of Montenegro, including<br />
any payment facilities and exemptions<br />
in 2003 and 2004.<br />
29
State aid<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
During the last meeting of the EC<br />
Enhanced Permanent Dialogue with the<br />
representatives of Montenegro, the<br />
Commission positively marked progress<br />
achieved in the area of state aid, noting<br />
that the Ministry of Finance of Montenegro<br />
did a lot within a short 10 month<br />
period of time.<br />
LEGAL REGULATIONS<br />
CONCERNING THE STATE AID<br />
CONTROL IN THE EU<br />
The state aid system in the European<br />
Union is defined under the Articles 87<br />
and 88 of the Treaty Establishing the European<br />
Community (hereinafter referred<br />
to as the Treaty).<br />
Pursuant to relevant EU regulations,<br />
state aid means any aid in terms of benefit<br />
or advantage granted by a state, or<br />
from state resources through a public,<br />
state authority, which favours certain<br />
companies or products (selection principle)<br />
or distorts or may distort level playing<br />
field in market<br />
According to Article 87, paragraph 1<br />
of the Treaty, the following shall be deemed<br />
state aid:<br />
1. any aid granted through State resources;<br />
2. any aid which favours certain undertakings,<br />
sector or region<br />
3. any aid which is selective because<br />
it distorts the market competition by favouring<br />
certain undertakings, sector or<br />
region;<br />
4. any aid which affects competition<br />
and trade between Member States.<br />
Types of state aids are as follows: horizontal<br />
state aid (intended for all economic<br />
entities participating in the market),<br />
sectoral state aid (intended for<br />
economic entities within specific economic<br />
and non-economic activities) and<br />
regional state aid (intended for less<br />
developed areas).<br />
State aid may include: subventions,<br />
tax allowances or any other form of<br />
Danijela Jauković<br />
non-payment of state fees; exemptions<br />
from payment of social contributions;<br />
granting interest rates/loans/guarantees/real<br />
estate under conditions which<br />
are more favourable then market ones;<br />
approving allowances for incurred business<br />
losses; export aid or regressive export<br />
crediting; establishing funds for<br />
development/housing construction;<br />
providing income and price support;<br />
providing goods or services which are<br />
not part of the public services; approving<br />
more favourable treatment in the<br />
public procurement, etc.<br />
Certain categories of the horizontal,<br />
sectoral and regional state aid may be<br />
allowed under conditions set forth under<br />
the EU by-laws.<br />
According to regulations and methodology<br />
of the EU, the following shall not<br />
be considered state aid: aid for beneficiaries<br />
which are not economic entities<br />
(households, handicapped persons, aid<br />
for infrastructure, educational institutions,<br />
hospitals, public housing, vocational<br />
training centers); general economic<br />
policy measures (quotas, public procurement,<br />
technical standards, general VAT<br />
reduction); aid granted by national and<br />
multinational organizations, EU funds,<br />
government functions (defense, public<br />
works).<br />
Article 88 of the Treaty defines procedure<br />
related to applying for and control<br />
of state aid, which is under the<br />
competence of a separate European<br />
Commission established to this end. The<br />
European Commission, together with<br />
Member States, constantly monitors all<br />
systems of aid existing within Member<br />
States and requires appropriate measures<br />
required for gradual development<br />
and action. Such authorization enables<br />
the Commission to indicate a change in<br />
state of affairs (by monitoring progressive<br />
development or functioning of<br />
common market) and accordingly<br />
launch examination of the existing state<br />
aid.<br />
If the European Commission finds<br />
that an aid granted by a Member State<br />
or through State resources is not in<br />
compliance with acquis communitarie<br />
or with common market or such aid is<br />
being misused, it shall decide that the<br />
State concerned shall abolish or alter<br />
such aid within a period of time to be<br />
determined by the Commission. If the<br />
State concerned does not comply with<br />
this decision within the prescribed time,<br />
the Commission may refer the matter to<br />
the Court of Justice<br />
On application by a Member State,<br />
the EU Council (hereinafter referred to<br />
as the Council) may decide that aid<br />
which that State is granting or intends<br />
to grant shall be considered to be compatible<br />
with the common market, if<br />
such a decision is justified by exceptional<br />
circumstances If, however, the Council<br />
has not made its attitude known within<br />
three months of the said application<br />
being made, the European Commission<br />
shall give its decision on the case.<br />
Regulations governing state aid by<br />
the WTO and those in the European<br />
Union are compatible particularly with<br />
respect to definitions and practical purposes.<br />
ADVISOR TO THE MINISTER<br />
On co-operation with the EU<br />
and international<br />
financial institutions<br />
DANIJELA JAUKOVIĆ,<br />
30
Enforcement of claims<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Enforcement of claims<br />
secured by the Contract on<br />
Fiduciary Transfer of Immovable<br />
Property Ownership Right<br />
Development of the monetary transactions,<br />
credits, banking and other<br />
forms of debtor-creditor relations<br />
brought about debt security problem. Creditors<br />
have more confidence in the right of<br />
pledge, as a mean of security, because the<br />
credit is then really secured.<br />
Pledge, as a mean of security, has a history<br />
in the Roman Law as trust and mortgage<br />
as well as in the Customary Law in the<br />
old Montenegro, when a debt was secured<br />
by Property Title Deed, and the existing documents<br />
testify to it. This issue is now regulated<br />
in the legal system of Montenegro by<br />
the Law on Trust, Law on Mortgage and<br />
Law on Pledge.<br />
In the course of allocation of credit<br />
funds from the Republic Budget, the Government<br />
of the Republic of Montenegro<br />
decided to secure credits through concluding<br />
Fiduciary Contracts. Real Estate Administration<br />
is in charge of estimation of property<br />
value, which is taken into trust. Pursuant<br />
to the provisions of the Law, this Administration<br />
is also established as specialized<br />
agency for registration of the contracts<br />
in the Real Estate Register. The Ministry of<br />
Finance uses the other two laws to secure<br />
debt only in cases when it is not possible to<br />
register a trust.<br />
Namely, in the period of the UN sanctions,<br />
on the proposal of relevant Ministries<br />
and according to appropriate decisions of<br />
the Government, funds from the Republic<br />
Budget were approved for crediting the tourist<br />
economy for the purpose of creation of<br />
conditions for summer and winter tourist<br />
season. For the aforementioned purposes<br />
over 17,0 mil. eur was approved, and in order<br />
to secure the extended credits, for the<br />
following companies' property was registered<br />
trust: "Ada Bojana" - Ulcinj riviera, Vila<br />
"Albatros" - HTP "Albatros". Hotel "Sozina" -<br />
HTP "Korali", Hotel "Palas" - HTP "Budvanska<br />
rivijera", Hotel "Tivat" - HTP "Primorje",<br />
Autocamp "Ciparis" - HTP "Mimoza" - Tivat,<br />
administrative building in Jaz - Montenegroexpress,<br />
Autocamp in Dobrota - HTP<br />
"Fjord", trust was also registered for five facilities<br />
HPT "Boka", Hotels "Boan" and "Šavnik"<br />
- HTP "Onogošt", six catering and<br />
tourst establishments of the SKI Center<br />
"Durmitor", Hotel "Mojkovac" - HTP Mojkovac,<br />
Restaurant "Kisjele vode" - HTP "Brskovo"<br />
Bijelo Polje, annexe to the Hotel "Lokve"<br />
- HTP "Berane", two tourist facilities HTP<br />
"Bjelasica" - Kolašin, Small stadium of the<br />
Sports Center Nikšić, Hotel "Bor" - HTP<br />
"Plavsko jezero", Hotel "Rožaje" - GTP "Turjak",<br />
Hotel "Grand" Cetinje - "Turist" Cetinje<br />
etc.<br />
Apart from tourist economy, in the framework<br />
of credit support to economy and<br />
realization of the Program of Restructuring<br />
as an instrument of credit security, the Ministry<br />
of Finance registered trust also in relation<br />
to the other companies' property,<br />
mostly administration buildings, land or<br />
social standard facilities.<br />
In the procedure of privatization of<br />
Montenegrobank, the Ministry of Finance<br />
assumed certain claims as well as significant<br />
property registered by the Bank for the<br />
purpose of approved credits security, which<br />
value amounts to over 12,0 mil. eur. On this<br />
basis Hotel "Galeb" - property of HTP "Ulcinjska<br />
rivijera" was assumed, and the ownership<br />
was transferred to the benefit of Government,<br />
Factory of Juices "Primorka" -<br />
Bar, five manufacturing divisions "Eksport<br />
drva" - Kolašin (ownership transferred to<br />
the Government), administrative building<br />
"V. Kruščića" - Mojkovac (ownership transferred<br />
to the Government), property "Restaur<br />
Art" - Budva (land and several flats in<br />
Budva, also registered to the benefit of Government),<br />
administrative building EI<br />
"Obod" - Cetinje (transferred ownership),<br />
bus station in Budva and land in Podgorica<br />
- ownership "Merkur" Budva etc.<br />
Ministry of Finance keeps relevant records<br />
and valid documentation, on the basis<br />
of which the enforcment of claims is executed,<br />
for the aforementioned and other fiduciary<br />
property.<br />
ENFORCEMENT OF CLAIMS<br />
In the procedure of initiating the enforcement<br />
of claims, the Ministry of Finance<br />
reviews the company's status, its financial<br />
standing and development perspective.<br />
Thus, the Government of the Republic of<br />
Montenegro, on the proposal of relevant<br />
ministry and consent of the Ministry of Finance,<br />
to the benefit of resolving the future<br />
development of company or its privatization,<br />
approves debt restructuring, debt conversion<br />
into shares (e.g. Metalac - Nikšić,<br />
Factory "4. novembar" - Mojkovac etc.) or,<br />
in relation to extraordinary cases, when the<br />
future of company is certain, it releases the<br />
debt (Mill "M. Asović" - Nikšić, "Javorak" -<br />
Nikšić, Brown coal mine Berane, ŠIP "Berane"<br />
- Berane, "Vukman Kruščić" - Mojkovac<br />
etc.).<br />
When debt recovery is done through<br />
bankruptcy, the Ministry of Finance and<br />
Government also have impact on social and<br />
economic status of debtors as well as on the<br />
privatization process. In that process, special<br />
attention is paid to workers of companies<br />
and their enforcement of rights. As regards<br />
certain cases the Government abandoned<br />
the enforcement priorities or a part<br />
of debt to the benefit of workers (SKI Cen-<br />
31
Enfocement of claims<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
ter "Durmitor", "Špiro Dacić" - Bijelo Polje,<br />
"19 decembar" - Podgorica, "Obod genex" -<br />
Cetinje, Jugooceanija - Kotor).<br />
In accordance with the said, if the debtor<br />
is not able to settle the credit within fixed<br />
terms, the Ministry of Finance mostly<br />
proposes to enforce the claims through property<br />
sale and payment of funds to the account<br />
of Treasury. But, in certain cases in<br />
the interest of the Government and its bodies,<br />
a part of property is taken over for the<br />
public institutions' needs. Thus, Hotel<br />
"Park" was taken over from HTP "Boka" -<br />
Herceg Novi for the needs of the Ministry of<br />
Interior - Regional Center for Underwater<br />
Mine Clearance, to the amount of<br />
2.423.341,00 eur, two facilities HTP "Bjelasica"<br />
Kolašin were assumed for the needs of<br />
the National park "Biogradska gora" and secondary<br />
school "Braća Selić" in Kolašin to<br />
the aggregate value of about 180.000,00 eur,<br />
business premises of "Lovćeninvest" Podgorica<br />
in Malo Brdo were taken for the needs<br />
of Institute for Accounting and Auditing<br />
etc.<br />
In the course of enforcement the Ministry<br />
of Finance pays special attention to enforcement<br />
of claims assumed from Montenegrobank,<br />
especially because it is the<br />
World Bank's requirement and condition to<br />
obtain special privileges in relation to credit<br />
funds withdrawal.<br />
Enforcement of claims is done mostly<br />
through the following procedures:<br />
1. In case of debtors in bankruptcy,<br />
Milodarka Novosel<br />
the Ministry of Finance decided to enforce<br />
claims pursuant to the Law on Economic<br />
Companies Insolvency, according to which<br />
secured creditors have enforcement priority.<br />
In that way, through bankruptcy the claim<br />
to the amount of (219.000,00 eur) was<br />
enforced against HTP "Fjord" - Kotor, started<br />
enforcement of claims against HTP "Ulcinjska<br />
rivijera" in bankruptcy proceeding<br />
(1,7 mil. eur collected), SKI Center "Durmitor"<br />
(778.900,00 eur collected), against<br />
company "Špiro Dacić" - Bijelo Polje Polje<br />
585.000,00 eur collected, and as regards the<br />
companies "Vukman Kruščić" and "Eksportdrvo"<br />
- Kolašin the property was transferred<br />
to the Government to the amount exceeding<br />
500.000,00 eur etc.<br />
2. As regards a number of debtors<br />
the debt was restructured, but the registered<br />
trust is to be kept until the debt is completely<br />
repaid, what is the case with company<br />
HTP "Primorje" - Tivat, TUP "Brskovo" -<br />
Bijelo Polje, "Ekozeta" - Podgorica, company<br />
"Merkur" - Budva, company "Mehanik trade"<br />
- Nikšić, "Budvanske rivijere" - Budva,<br />
"Beranke" - Berane, "Primorke" - Bar, etc.<br />
3. As regards a number of debtors,<br />
which have mutual obligations and claims,<br />
the debt is settled by means of mutual<br />
offsetting, what is the case with comapany<br />
HTP "Plavsko jezero" - Plav, "Vektra" - Podgorica.<br />
There are also debt offsetting proposals<br />
in relation to some other debtors.<br />
4. The greatest part of debt is recovered<br />
by encumbered assets sale. Aiming at a<br />
more efficient sale, the Ministry of Finance<br />
established a Commission for Sale, composed<br />
of representatives of the Ministry, debtors<br />
and relevant Ministry, which was a<br />
proposer of credit funds allocation. So far,<br />
in this manner were sold facility "Mali stadion"<br />
- property of the Sports Center - Nikšić<br />
(debt due to the Budget 34.000,00 eur<br />
and Tax Administration 110.000,00 eur),<br />
Hotel "Mojkovac" ownership HTP "Mojkovac"<br />
(debt recovered to the amount of<br />
129.000,00 eur), facility "Vukman Kruščić" -<br />
Mojkovac (debt recovered to the amount of<br />
48.000,00 eur) , Autocamp "Ciparis" (debt<br />
recovered to the amount of 626.996,00<br />
eur), company HTP "Boka" motel "Palas"<br />
was sold and debt recovered to the amount<br />
of 215.356,00 eur.<br />
We note that a part of property is sold<br />
for foreign currency savings bonds of citizens,<br />
what is of special importance in order<br />
to disburden the budget of the Republic on<br />
this basis, what was especially considered in<br />
the Bulletin No. 2.<br />
Finally, it can be concluded that Contract<br />
on Fiduciary Transfer of Immovable<br />
Property Ownership Right, which was concluded<br />
pursuant to the law and registered<br />
in the Real Estate Register, is the best instrument<br />
of debt security, what 2004 and<br />
2005, over 4,0 mil. eur of claims were enforced<br />
only on this basis, while the value of property<br />
transferred to the Government of<br />
the Republic of Montenegro exceeds 10,0<br />
mil. eur and its sale is expected in the current<br />
year. Therefore, the Ministry of Finance<br />
is well organized to enforce the claims on<br />
this basis and it will continue these activities<br />
also in 2006.<br />
Of course, financial support to economy<br />
was approved in order to maintain certain<br />
economic entities in the past period.<br />
Therefore, in the debt collection procedure<br />
it takes into account not to bring into danger<br />
the debtors' interests in the privatization<br />
and economic recovery period.<br />
SECTOR FOR CORPORATE SERVICES<br />
AND PROPERTY-LEGAL AFFAIRS<br />
Independent Adviser,<br />
MILODARKA NOVOSEL<br />
32
Enforcement of claims<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Enforcement of claims by the<br />
Government of the Republic of<br />
Montenegro in Court procedures<br />
Following organization and status<br />
changes of: Jugobanka AD Podgorica,<br />
Montenegrobanka AD Podgorica,<br />
Bank for Development of Montenegro<br />
and Republic Directorate for Commodity<br />
Reserves, the Government of the Republic<br />
of Montenegro - Ministry of Finance<br />
assumed the claims, which are due to these<br />
legal entities against their clients on the<br />
basis of realized debenture arrangements.<br />
Ministry of Finance by the nature of<br />
its competence enforces also claims of<br />
the Government on the basis of credit<br />
funds approved from the Budget of the<br />
Republic of Montenegro.<br />
In the past activities in relation to enforcement<br />
of these claims, the Ministry of<br />
Finance consolidated all the assumed claims<br />
with the same debtor - according to<br />
all mentioned basis so that 370 legal entities<br />
- debtors were entered in the Ministry<br />
of Finance database. Such approach<br />
provides for the best debt management<br />
and offers the biggest number of possibilities<br />
to resolve and collect the claims,<br />
what represents special interest for the<br />
Republic and of course the end debtor.<br />
While reviewing the status of debt,<br />
the Ministry of Finance stated that credit<br />
beneficiaries did not settle their claims<br />
although the agreed term became due.<br />
Therefore, the Ministry decided to process<br />
court procedures in the jurisdiction<br />
of the territory of the Republic of Montenegro,<br />
as one of the models of due claims<br />
enforcement. Pursuant to the Law on Public<br />
Prosecutor, the Public Prosecutor represents<br />
the Republic in the property-legal<br />
disputes. The Ministry of Finance and<br />
Public Prosecutor established permanent<br />
cooperation, through offering advice and<br />
proposals, due dilligence testing, submitting<br />
requested documentation, etc.<br />
By application of the Law on Foreign<br />
Debt and Old Foreign Exchange Savings,<br />
Law on Budget and Law on Economic Enterprizes<br />
Insolvency, the Ministry of Finance<br />
undertook several activities until<br />
the end of 2005 in order to enforce the<br />
aforementioned creditors' claims through<br />
court procedures to the total amount<br />
of 3.403.601,47 eur.<br />
The cases were submitted to the Public<br />
Prosecutor in order to institute civil<br />
and enforcement proceedings in the<br />
competent courts.<br />
The claims against debtors which<br />
bunkruptcy proceedings and property<br />
sale for the purpose of enforcement of<br />
claims to the amount of 20.049.926,35<br />
eur are still pending in the competent<br />
courts in the territory of the Republic of<br />
Montenegro. This was reported to the<br />
competent courts by the Government of<br />
the Republic of Montenegro ("Autoprevozno"<br />
- Nikšić, "Gornji Ibar" - Rožaje,<br />
"Jadran - Perast" - Perast, Pilana - Danilovgrad,<br />
ŠP A.D. "Šumarstvo" - Rožaje,<br />
"Velimir Jakić" - Pljevlja, Coal Mine - Berane,<br />
"Šuplja stijena" - Pljevlja, ŠIK "Bor" -<br />
Plav, ŠIP "Berane" - Berane, "Beranka" -<br />
Berane etc.). This amount includes also<br />
claims on the basis of foreign credits extended<br />
by the international credit institutions.<br />
But, having in mind that these<br />
are generally unsecured credits and bad<br />
financial standing of end users to repay<br />
credits, the collection procedure will be<br />
relatively long and the outcome will be<br />
uncertain.<br />
According to the Ministry of Finance<br />
records, the Government of the Republic<br />
of Montenegro claims, which have been<br />
settled so far by the final court decision,<br />
amount to 606.609,22 eur ("Veleprodaja"<br />
- Berane, "Ribarstvo" - Rijeka Crnojevića,<br />
Directorate of Public Works of Montenegro<br />
- Podgorica, Sugar Factory "Kovin").<br />
In addition, the statement of claim<br />
was adopted in the first instance procedure<br />
in relation to the cases "Iling" - Kolašin<br />
and "Maestraltours" - Budva to the<br />
total amount of 169.782,30eur.<br />
Claims of the Republic of Montenegro<br />
include also credits extended by the<br />
Employment Bureau, from the Republic's<br />
funds, through Montenegrobank and as<br />
self-employment Project. 32.343,00 eur<br />
have been collected on that basis so far.<br />
Aiming at a more efficient enforcement<br />
of claims, the Government of the<br />
Republic of Montenegro approved conclusion<br />
of the Contract on Debt Restructuring<br />
with debtors under favourable<br />
conditions (longer repayment period, lower<br />
interest rate). Conclusion of these<br />
contacts begun in late 2005 and it will<br />
continue in the course of 2006.<br />
Ministry of Finance will, within the<br />
Sector for Corporative and Property Legal<br />
Affairs, proceed to pay great attention to<br />
and take necessary activities in order to<br />
successfully and promptly enforce the<br />
aforementioned claims.<br />
Senior Advisor<br />
GORDANA VUKOSLAVČEVIĆ<br />
33
Functioning of the games of chance system<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Functioning of the games<br />
of chance system, highlighting<br />
activities aimed at<br />
suppressing grey economy<br />
(CONTROL, REGISTRATION AND RE-REGISTRATION OF ORGANIZERS OF GAMES OF CHANCE)<br />
Introduction:<br />
New Law on Games of Chance (»Official<br />
Gazette of RM«, No. 52/04) entered<br />
into force on 7 August 2004. Pursuant to<br />
the Law, the Ministry of Finance, as a<br />
competent authority, gives approvals -<br />
concessions for organization of games of<br />
chance, examines whether space-related<br />
and technical conditions are met, and supervises<br />
activities of organizers of games<br />
of chance. Following adoption of the Law,<br />
necessary by-laws were adopted within<br />
set deadline, such as:<br />
Rulebook on casino’s spatial and<br />
technical conditions to be met;<br />
Rulebook on spatial and technical<br />
conditions for organization of games of<br />
chance;<br />
Rulebook on spatial and technical conditions<br />
for a gambling machines parlor;<br />
Rulebook on spatial and technical<br />
conditions for organizing of bingo, TV<br />
tombola and limited-access tombola, and<br />
Rulebook setting conditions for performing<br />
technical review of gambling<br />
machines and game tables.<br />
Accordingly, normative prerequisites<br />
have been put in place, which are required<br />
for implementation of the Law and<br />
efficient functioning of the games of<br />
chance system in general and supervision<br />
of such system as well.<br />
Chance Department and information<br />
provided by local self-government authorities,<br />
a register of organizers of games of<br />
chance conducting activities in line with<br />
the previous Law has been established.<br />
According to the register, there were 72<br />
organizers arranging games of chance, as<br />
follows:<br />
- TV tombola arranged by 6 organizers;<br />
- Limited-access tombola arranged by<br />
10 organizers;<br />
- Lottery games arranged by 1 organizer;<br />
- Casino games of chance arranged by<br />
1 organizer;<br />
- Betting games arranged by 48 organizers<br />
within 160 betting places;<br />
- Games of chance in gambling machines<br />
parlor arrange by 7 organizers.<br />
According to data under the register<br />
and information obtained from on-site<br />
inspection, it was clear that there had<br />
been a large number of organizers of games<br />
of chance who conducted their activities<br />
without prior approval for work<br />
and/or who violated the Games of Chance<br />
Law by expanding their activities. As a<br />
result of their activities in the grey zone,<br />
budgetary revenues stemming from concession<br />
charges were lower and, more important,<br />
it had direct negative effect on<br />
activities of registered organizers.<br />
From 27 April 2005, in co-operation<br />
with the Tax Administration inspectors,<br />
the Ministry of Finance initiated regular<br />
controls with regard to possession of approval<br />
for work by organizers of games of<br />
chance in casinos, gambling machines<br />
parlors and betting places, as well as controls<br />
of their business activities. 205 controls<br />
have been conducted so far. All orga-<br />
ACTIVITIES AIMED AT<br />
SUPPRESSING GREY<br />
ECONOMY IN THE<br />
GAMES OF CHANCE FIELD:<br />
First of all, based on data available<br />
with the Ministry of Finance, Games of<br />
GAMES OF CHANES DEPARTMENT: Radmila Vorotović, Head of GAMES OF CHANES<br />
DEPARTMENT Veljko Begović, Chief inspector - GAMES OF CHANES department<br />
34
Functioning of the games of chance system<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
nizers of games of chance without having<br />
approval for work were requested to obtain<br />
the same within 15 days from the day<br />
of the control. Most of them obtained the<br />
said approval, whereby both number of<br />
registered organizers and revenues stemming<br />
from concession charges were increased.<br />
Consequently, most of the organizers<br />
started conducting legal operations<br />
and were registered in compliance with<br />
the Law, fulfilling thus their liabilities<br />
arising out of concession charges.<br />
Out of total number of organizers<br />
who were controlled, 9 organizers failed<br />
to proceed as required by the inspector,<br />
and, accordingly, they were prohibited to<br />
conduct their activities until identified<br />
improper management was removed, and<br />
a request for institution of infringement<br />
proceedings against these persons was filed.<br />
Moreover, criminal complaint was<br />
brought with the competent authority<br />
against 2 organizers, who were prohibited<br />
to conduct their activities, but who removed<br />
the seal and continued performing<br />
their activities in spite of the prohibition<br />
in force.<br />
According to Article 76 of the Games<br />
of Chance Law (»Official Gazette of RM«,<br />
No. 52/04), legal persons who arranged<br />
games of chance based on approval by the<br />
Ministry of Finance and competent local<br />
self-government authority were allowed<br />
to continue arranging of such games until<br />
expiration date of the approval, but<br />
GAMES OF CHANES DEPARTMENT<br />
not later than a year after the day of this<br />
Law becoming effective. Such deadline expired<br />
on 10 August 2005. Given that conditions<br />
for arranging of games of chance<br />
are stricter under the new Law as compared<br />
to the previous one, the organizers<br />
wanted to make use of advantages granted<br />
under previous Law so most of them<br />
waited until closing date to apply for reregistration.<br />
In the period from 21 July<br />
2005 to 28 February 2006, 383 concessions<br />
were granted for arranging of games<br />
of chance in compliance with the<br />
new Law on Games of Chance, as follows:<br />
33 organizers of betting games obtained<br />
concession to open 330 betting places.<br />
12 organizers of games of chance in<br />
the gambling machines parlor obtained<br />
concession to open 40 gambling machines<br />
parlors.<br />
2 organizers of TV tombola obtained<br />
concession to arrange 3 TV tombolas.<br />
9 organizers of limited-access tombola<br />
obtained concession to arrange 9 limited-access<br />
tombolas.<br />
1 organizar of casino games obtained<br />
concession to open a casino.<br />
All organizers who obtained concessions<br />
regularly fulfill their obligations.<br />
Financial effects are as follows:<br />
In 2004, total revenues stemming<br />
from concession charges amounted to<br />
1.424.415,37 eur, or on average about<br />
119.000eur per month.<br />
In 2005, total revenues stemming<br />
from concession charges amounted to<br />
1.763.091,59 eur, or on average<br />
146.924,30 eur per month. Out of this<br />
amount, until new Law became effective,<br />
i.e. for the first 7 months, the revenues<br />
amounted to 901.669,92 eur or on average<br />
128.809,98 eur per month. For the last<br />
5 months in 2005, the revenues amounted<br />
to 861.421,67 eur or on average<br />
172.284,20 eur per month.<br />
- Revenues in January 2006 amounted<br />
to 215.366.83 eur.<br />
- Revenues in February 2006 amounted<br />
to 301.175.04 eur.<br />
***<br />
The Law on Games of Chance and related<br />
by-laws created institutional framework<br />
for a more regulated and functional<br />
games of chance system. The organizers<br />
were given time period and possibility to<br />
harmonize their activities with the new<br />
Law within the transitional period. At the<br />
same time, from the very adoption of the<br />
Law, Ministry of Finance together with<br />
the Tax Administration launched wellconceived<br />
training, control and re-registration<br />
activities with respect to the organizers<br />
of games of chance in line with the<br />
adopted Law. Until 10 August, i.e. expiration<br />
of the transition period, most of the<br />
organizers harmonized their activities<br />
with the provisions under the new Law.<br />
Infringement proceedings have been instituted<br />
against those persons who failed<br />
to harmonize their activities with the<br />
new Law within the transition period.<br />
Number of organizers and amount of<br />
revenues stemming from the concession<br />
charges (both indicators have almost<br />
been doubled in the period from adoption<br />
of the Law until now) indicate both<br />
a success in the activities aimed at regulating<br />
the games of chance system in Montenegro<br />
and a significant elimination of<br />
the grey economy in this field within a<br />
short period of time. Regular inspections<br />
both on-the-spot and from the office,<br />
bring about apparent results.<br />
***<br />
Games of chance department<br />
RADMILA VOROTOVIĆ, HEAD<br />
VELJKO BEGOVIĆ, CHIEF INSPECTOR<br />
35
Law on Compulsory Traffic Insurances<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Law on Compulsory<br />
Traffic Insurances<br />
Pursuant to the existing law, the Compulsory<br />
Traffic Insurances are regulated<br />
by the single Law on Property<br />
and Personal Insurance ("Official Gazette<br />
of the Federal Republic of Yugoslavia"<br />
No.30/96). In contrast to that, the Draft of<br />
the new Law on Insurance envisages adoption<br />
of the special law on compulsory traffic<br />
insurances.<br />
The reason for such approach in defining<br />
the legal regulations was determined<br />
due to the need to include in the provisions<br />
of this law a wide range of Republic<br />
entities, which should not be set in the framework<br />
of the laws regulating the conditions<br />
and manner of establishment, doing<br />
business and supervision of insurance<br />
companies and companies which perform<br />
activities linked to the insurance activities.<br />
At the same time, separating compulsory<br />
insurances in a special law points to significance<br />
of this insurance and enables its<br />
easier application. In addition, European<br />
Union Directives, which attach special importance<br />
to compulsory insurances, as<br />
well as many Conventions of international<br />
organizations in relation to traffic indicate<br />
to special definition of regulations on the<br />
level of compulsory insurance.<br />
The Law on Compulsory Traffic Insurances<br />
introduces certain novelties, such<br />
as e.g. obligation to collect and keep data<br />
necessary to conclude an agreement on insurance<br />
and indemnification of damages.<br />
In addition, this law envisages the possibility<br />
for healthcare, pension and disability<br />
insurance funds and voluntary healthcare<br />
insurance funds to ask the insurance companies<br />
to refund the amounts paid to<br />
their insurees, within limits of obligations<br />
assumed by the insurance agreement,<br />
what was not enabled by the past law.<br />
The Law envisages obligatory cooperation<br />
of insurance companies, which handle<br />
compulsory insurances in the Republic,<br />
in particular in relation to:<br />
- indemnification on the basis of the<br />
international agreements (green cards);<br />
- indemnification of damages caused<br />
by uninsured, unknown vehicles and vehicles<br />
insured with dissolved insurance companies;<br />
- proposals of conditions and tariffs of<br />
premiums for compulsory insurances, etc.,<br />
Novelty in the Draft Law is establishment<br />
of an Indemnification Fund,<br />
which will perform indemnification of damages<br />
caused by the uninsured and unknown<br />
vehicles and damages caused by the<br />
vehicles insured with the dissolved insurance<br />
companies. The activities, which were<br />
transferred to the Association of Insurance<br />
Organizations of Serbia and Montenegro,<br />
(Guarantee Fund) by means of public<br />
authorizations in accordance with the<br />
past insurance, will be dealt with on the<br />
level of the Republic of Montenegro according<br />
to the new regulations. The Indemnification<br />
Fund is to be established within<br />
the regulatory body, and the manner of its<br />
functioning will be regulated by special regulations.<br />
Such regulations are adjusted to the<br />
conditions of Montenegrin Insurance<br />
Market.<br />
Milanka Obradović<br />
Draft Law on Compulsory Traffic Insurances<br />
consists of the following nine chapters:<br />
Basic Provisions; Insurance of Passengers<br />
in Public Transport against Consequences<br />
of Accident; Insurance of Motor<br />
Vehicles Owners against responsibility for<br />
damage inflicted to third parties; Insurance<br />
of Vessels Owners against responsibility<br />
for damage inflicted on third parties; Insurance<br />
of Aircrafts Owners against responsibility<br />
for damage inflicted on third parties;<br />
Cooperation of Insurance Companies<br />
and Branches of Foreign Insurance Companies;<br />
Indemnification Fund; Penalty<br />
Provisions; Transitional and Final Provisions.<br />
Adoption of this law will regulate the<br />
compulsory insurances issue in Montenegro<br />
in a more comprehensive manner and<br />
provide for protection of the citizens of<br />
Montenegro by means of relevant penalty<br />
policy in the framework of responsibility<br />
for damages caused by the traffic vehicles<br />
in the public transport.<br />
Department for insurance control<br />
Coordinator of the Department,<br />
MILANKA OBRADOVIĆ<br />
36
Agenda of the Ministry of Finance<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Agenda of the<br />
Ministry of Finance for 2006<br />
I. THEMATIC PART<br />
ECONOMIC POLICY AND<br />
ECONOMIC DEVELOPMENT<br />
1.Information on the existing business<br />
barriers with proposal to adopt relevant<br />
regulations aimed at their elimination<br />
Information will make reference to the<br />
existing business barriers, assesment of situation<br />
and proposal to adopt relevant regulations<br />
aimed at their elimination.<br />
Analyzer: Ministry of Economy, Ministry<br />
of Tourism, Ministry of Environmental Protection<br />
and Spatial Planning, Ministry of Finance<br />
and Ministry of Justice<br />
Term: I quarter<br />
Working group in charge:<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Political System and Internal<br />
Policy<br />
2. Feasibility study of setting up regulatory<br />
mechanisms, which are related<br />
to privatization of enterprizes in the<br />
field of utility services<br />
The study will examine possible models<br />
of regulatory mechanisms, which will provide<br />
for a clear and transparent manner of realization<br />
of preceding activities, on the basis<br />
of which the privatization process public utility<br />
enterprizes will be carried out, and<br />
which will be respected by the local self-governance<br />
units. In addition, the Study will<br />
define also the manner of determination of<br />
services and delivered products prices policy<br />
in the field of utility services.<br />
Analyzer: Ministry of Environmental<br />
Protection and Spatial Planning in cooperation<br />
with the Ministry of Finance, Ministry<br />
of Justice, Agency for Economic Restructuring<br />
and Foreign Investments and Community<br />
of Municipalities of Montenegro<br />
Term: III quarter<br />
Working groups in charge:<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Financial System and<br />
Public Expenditures<br />
3. Feasibility study for establishment<br />
of a special entity for housing<br />
policy and National Housing Fund<br />
The objective of this study is to examine<br />
the most acceptable model for Montenegro<br />
for realization of activities related to the development<br />
in the field of housing, and in<br />
that connection, efficient implementation of<br />
Action Plan for Housing Policy as well as National<br />
Housing Fund.<br />
Analyzer: Ministry of Environmental<br />
Protection and Spatial Planning in cooperation<br />
with the Ministry of Finance, Ministry<br />
of Justice, Agency for Economic Restructuring<br />
and Foreign Investments and Community<br />
of Municipalities of Montenegro<br />
Term: IV quarter<br />
Working groups in charge:<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Financial System and<br />
Public Expenditures<br />
FINANCIAL SYSTEM, SOCIAL<br />
ACTIVITIES AND SOCIAL<br />
POLICY MEASURES<br />
1.Guidelines for capital budget drafting<br />
The guidelines will define the manner<br />
and procedure of capital budget drafting for<br />
the purpose of a more transparent financial<br />
reporting and providing a base for more quality<br />
decision-making in the area of economic<br />
policy.<br />
Analyzer: Ministry of Finance<br />
Term: I quarter<br />
Working groups in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
Commission for Budget<br />
2. Report on status of the public<br />
debt of Montenegro (until December 31,<br />
2005), with reference to implementation<br />
of the Strategy for Public Debt Management<br />
of the Republic in 2005<br />
The report will present the status of public<br />
debt on December 31, 2005.<br />
Analyzer: Ministry of Finance<br />
Term: I quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
3.Tax policy realization analysis for<br />
2005<br />
The analysis will examine the tax policy<br />
application effects in the previous year and<br />
its influence on economy, budget and funds.<br />
It will also propose the relevant measures for<br />
the policy improvement in the next year.<br />
Analyzer: Ministry of Finance, in cooperation<br />
with the Tax Administration<br />
Term: I quarter<br />
Working groups in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
4. Report on consolidated public expenditures<br />
(central budget, extrabudgetary<br />
funds and municipalities) in 2005<br />
This report will elaborate indicators of<br />
the consolidated public expenditures (central<br />
budget, extrabudgetary funds and municipalities)<br />
in 2005.<br />
Analyzer: Ministry of Finance<br />
Term: I quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
5.Report on macrofiscal developments<br />
The report will contain indicators, which<br />
are related to the macrofiscal developments.<br />
Analyzer: Ministry of Finance<br />
Term: quarterly<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
6.Report on implementation of the<br />
adopted Health Financial System Sustainability<br />
Plan for 2005-2007<br />
Aiming at proceeding with the planned<br />
Health System Reform implementation, dynamics<br />
of implementation of the adopted<br />
plan will be reviewed. Report on implementation<br />
of the project ''Health System Promotion<br />
in Montenegro“, which is being carried<br />
out in cooperation with the World Bank, will<br />
37
Agenda of the Ministry of Finance<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
also be submitted quarterly.<br />
Analyzer: Ministry of Health, in cooperation<br />
with the Ministry of Finance and Republic<br />
Health Insurance Fund<br />
Term: quarterly<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
7. Information on planned rationalizations<br />
of activities and work of the<br />
health institutions<br />
The information will serve to propose<br />
measures of rationalization of activities and<br />
work of the health institutions in Montenegro.<br />
Analyzer: Ministry of Health, in cooperation<br />
with the Ministry of Finance and Republic<br />
Helath Insurance Fund<br />
Term: I quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
8.Report on macroeconomic and fiscal<br />
policy realization in the first six<br />
months and proposal of objectives and<br />
guidelines of fiscal policy on the basis of<br />
which the receipts and expenses are<br />
planned for the next year<br />
Pursuant to provisions of Article 20, paragraph<br />
1 of the Law on Budget, the report<br />
will contain data which include analysis of<br />
macroeconomic aggregates development, as<br />
starting point for budgetary planning, which<br />
are related to the development of gross domestic<br />
product, prices, earnings and employment.<br />
Analyzer: Ministry of Finance<br />
Term: July 31, 2006<br />
Working groups in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
Commission for Budget<br />
9.Analysis of own source revenues<br />
collection of the Republic Health Insurance<br />
Fund<br />
Analysis of own source revenues collection<br />
of the Fund will serve to define the proposal<br />
of increase of coverage and efficiency<br />
in the aforementioned receipts collection.<br />
Analyzer: Ministry of Finance, in cooperation<br />
with the Ministry of Health, Republic<br />
Health Insurance Fund and Tax Administration<br />
Term: semiannually<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
10.Analysis of own source revenues<br />
collection of the Republic Pension and<br />
Disability Insurance Fund<br />
Analysis of own source revenues collection<br />
of the Fund will define the proposal of<br />
increase of coverage and efficiency in the aforementioned<br />
receipts collection.<br />
Analyzer: Ministry of Finance, in cooperation<br />
with the Ministry of Health, Republic<br />
Pension and Disability Insurance Fund and<br />
Tax Administration<br />
Term: semiannually<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
11. Information on planned rationalization<br />
of the Republic Pension and Disability<br />
Insurance Fund<br />
The information will reflect the activities,<br />
which, in the framework of pension administration<br />
reform and overall reform activities<br />
intended for reorganization and implementation<br />
of new business processes, are being<br />
continuously implemented by the Fund<br />
in relation to internal rationalization in order<br />
to promote the technical-technological<br />
process of work and create conditions for legal,<br />
efficient and duly servicing of pension<br />
and disability rights.<br />
Analyzer: Ministry of Labour and Social<br />
Care and Ministry of Finance in cooperation<br />
with the Republic Pension and Disability Insurance<br />
Fund and Tax Administration<br />
Term: semiannually<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
12. Report on the Ministry’s work in<br />
the field of financial system and public<br />
expenditures and situation in the administrative<br />
area, along with the administration<br />
authorities’ reports on work and<br />
situation in the areas for the purpose of<br />
which it was established in 2005<br />
Article 62 of the Law on Public Administration<br />
(''Official Gazette of the Republic of<br />
Montenegro'', No. 37/03), regulates that the<br />
Ministries shall, at least annually, submit to<br />
the Government the report on work and administrative<br />
area situation. In addition, Article<br />
72 of the Law regulates that any administration<br />
authority shall, at least annually submit<br />
to the Ministry a report on work and situation<br />
in the areas for which it has been established.<br />
The report has to consist of a<br />
description of implementation of laws and<br />
other regulations, realization of programs<br />
and conclusions of the Government, measures<br />
they undertook and results they achieved.<br />
Analyzer: Ministry of Finance, Ministry<br />
of Education and Science, Ministry of Culture<br />
and Media, Ministry of Health, Ministry<br />
of Labour and Social Care<br />
Term: III quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
13.Report on consolidated public expenditures<br />
(central budget, extrabudgetary<br />
funds and municipalities) for the<br />
period January – June 2006<br />
This report will refer to the indicators of<br />
consolidated public expenditures (central<br />
budget, extrabudgetary funds and municipalities)<br />
for the period January – June 2006<br />
Analyzer: Ministry of Finance<br />
Term: III quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
14. Report on implementation of PA-<br />
CO Impact – Council of Europe project<br />
for the Anti-corruption Initiative Administration<br />
capacities strenghtening<br />
PACO Impact – Council of Europe project<br />
is aimed at supporting the Southeastern<br />
Europe countries to implement the activities<br />
related to drafting and implementation of<br />
anti-corruption plans and strategies. In the<br />
framework of planned activities for Montenegro<br />
it is envisaged to strenghten capacities<br />
of the Anti-corruption Initiative Administration,<br />
which will be especially related to intensification<br />
of cooperation between the<br />
competent authorities for prevention and<br />
combating corruption, public awareness<br />
raising about the manifestations of corruption,<br />
negative corruption trends and strenghtening<br />
the citizens’ role in revealing and<br />
preventing corruption.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Anti-corruption Initiative<br />
Administration<br />
Term: III quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Political System and Internal<br />
Policy<br />
15. Analysis of tax policy implementation<br />
for the period January - October<br />
2006<br />
The analysis will examine the tax policy<br />
application effects in the first 10 months in<br />
2006 and its influence on the economy, Budget<br />
and funds, and it will propose relevant<br />
measures for promotion of the policy in the<br />
next year.<br />
Analyzer: Ministry of Finance, in coope-<br />
38
Agenda of the Ministry of Finance<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
ration with Tax Administration<br />
Term: IV quarter - December<br />
Working groups in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
16.Report on execution of the annual<br />
auditing plan of the Budget beneficiaries<br />
The report will include the review of audits<br />
done in 2006 on the basis of annual auditing<br />
plan for 2006 with key findings,<br />
which occurred in the procedure of auditing<br />
the controlled Budget beneficiaries.<br />
Analyzer: Ministry of Finance<br />
Term: IV quarter<br />
Working gorup in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
II. NORMATIVE PART<br />
ECONOMIC POLICY AND<br />
ECONOMIC DEVELOPMENT<br />
1. Draft Law on Amendments to the<br />
Law on Water Supply and Waste Water<br />
and Solid Waste Disposal from the areas<br />
of the following municipalities: Herceg<br />
Novi, Kotor, Tivat, Budva, Bar, Ulcinj<br />
and Cetinje and other legal and bylaw<br />
acts related to this field<br />
This Law will establish relations in the<br />
areas of regional water supply, waste water<br />
and solid waste management in accordance<br />
with the strategic planning documents,<br />
which are related to these areas, in the Municipalities<br />
of the Montenegrin seaside and<br />
Municipality of Cetinje.<br />
Analyzer: Ministry of Environmental<br />
Protection and Spatial Planning in cooperation<br />
with the Ministry of Agriculture, Forestry<br />
and Water Supply and Ministry of Finance<br />
Term: III quarter<br />
Working group in charge:<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
Commission for Financial System and<br />
Public Expenditures<br />
2. Draft Law on Housing Co-operatives<br />
This Law will define possibilities of granting<br />
special privileges in the area of tax and<br />
land policy, so that all housing cooperatives<br />
can give their contribution to the housing<br />
problem resolution.<br />
Analyzer: Ministry of Environmental<br />
Protection and Spatial Planning in cooperation<br />
with the Ministry of Finance, Ministry<br />
of Justice, Community of Montenegrin Municipalities<br />
and Local-governance Units.<br />
Term: IV quarter<br />
Working group in charge:<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
Commission for Financial System and<br />
Public Expenditures<br />
FINANCIAL SYSTEM, SOCIAL<br />
ACTIVITIES AND SOCIAL<br />
POLICY MEASURES<br />
1.Draft Law on Public Procurement<br />
Harmonization with the regulations of<br />
European Union in this area will be done<br />
and the existing legal solutions will be more<br />
clearly and precizely defined by this Law.<br />
Analyzer: Ministry of Finance<br />
Term: I quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
2. Draft Law on Local Municipal Fees<br />
The issue of public areas and fees payment<br />
obligation system, the amount of<br />
which will be determined by local governances’<br />
own regulations, will be regulated in a<br />
comprehensive manner by this law.<br />
Analyzer: Ministry of Finance<br />
Term: I quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
3. Draft Law on Annual Financial<br />
Statement of the Budget of the Republic<br />
of Montenegro for 2005<br />
The Draft Law on Annual Financial Statement<br />
is prepared pursuant to the Law on<br />
Budget, which regulates the manner of preparation,<br />
drafting and submitting the annual<br />
statement.<br />
Analyzer: Ministry of Finance<br />
Term: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
Commission for Budget<br />
4.Draft Law on Property-legal Relations<br />
This Law will regulate the property-legal<br />
relations in Montenegro. This is especially<br />
for the reason that this area was until now<br />
regulated by the Law on Elements of Property–legal<br />
Relations (''Official Gazette of<br />
the Socialist Federal Republic of Yugoslavia'',<br />
No. 6/80, 36/90, 29/96). The Law will<br />
regulate and unify also other subject-matter<br />
included in other laws, which treat this<br />
area.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Ministry of Justice<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
5. Draft Law on State Property<br />
This Law will more precizely regulate the<br />
monitoring of management and usage of<br />
state property and the competence of the<br />
Republic in this area will be defined in a more<br />
adequate manner.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Ministry of Justice and Real<br />
Estate Administration<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Political System and Internal<br />
Policy<br />
6.Draft Law on Mandatory Insurance<br />
in Traffic<br />
Directives of the European Union, which<br />
pay special attention to mandatory insurances,<br />
which are subject to many conventions<br />
of international organizations in traffic, also<br />
refer to adoption of a new Law on Mandatory<br />
Insurance in Traffic. Regulating the mandatory<br />
insurance by a special law indicates<br />
to the significance of this insurance and enables<br />
its easier application.<br />
Analyzer: Ministry of Finance<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
7. Draft Law on Restitution of Dispossessed<br />
Property Rights and Religious<br />
Communities Indemnification<br />
39
Agenda of the Ministry of Finance<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
This Law will regulate, pursuant to Article<br />
8 paragraph 2 of the Law on Restitution<br />
of Dispossessed Property Rights and Indemnification<br />
(''Official Gazette of the Republic<br />
of Montenegro'', No. 21/04), conditions,<br />
manner and procedure of restitution of<br />
rights of ownership and other property<br />
rights and religious communities indemnification<br />
for rights dispossessed for the benefit<br />
of nation-wide, public, social and cooperative<br />
ownership.<br />
Analyzer: Ministry of Finance<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Political System and Internal<br />
Policy<br />
8. Draft Law on Amendments and<br />
Supplements to the Law on Money-<br />
Laundering Prevention and Terrorism Financing<br />
This Law will harmonize the applicable<br />
law with the ''Directive 2005 of the European<br />
Parliament and Council of Europe on prevention<br />
of using financial system for the<br />
purpose of money laundering and terrorism<br />
financing''.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Anti Money-Laundering<br />
Agency<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Political System and Internal<br />
Policy<br />
9.Draft Law on State Aid Control<br />
This Law will regulate general conditions<br />
and rules for preparation, allocation, control<br />
of allocation and usage of state aid, and subsequent<br />
state aid approval and reimbursement.<br />
Analyzer: Ministry of Finance<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
10. Draft Law on Tax Advisors<br />
This Law will regulate the tax advisors activities<br />
as an independent and autonomous<br />
occupation, their authorizations and obligations,<br />
aiming at creation of better prerequisites<br />
for a more efficient tax laws application.<br />
Analyzer: Ministry of Finance<br />
Rok: II quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
11.Draft Law on Budget of the Republic<br />
of Montenegro for 2007<br />
Analyzer: Ministry of Finance<br />
Term: November, 30, 2006<br />
Working groups in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
Commission for Political System and Internal<br />
Policy<br />
Commission for Budget<br />
12.Draft Law on Amendments and<br />
Supplements of the Law on Local Self-<br />
Governanace Funding<br />
This Law will bring about improvement<br />
of the existing solutions, which are related<br />
to specifying the criteria to be used for allocation<br />
of funds of the Equalization Fund,<br />
as well as specifying own source revenues<br />
types, which can be introduced by municipalities<br />
in the framework of their regulations.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Ministry of Justice<br />
Rok: III quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Political System and Internal<br />
Policy<br />
13.Draft Law on Amendments and<br />
Supplements of the Customs Law<br />
This Law will make adjustments to the<br />
existing solutions with the new standards of<br />
EU, WTO, GATA, as well as the other international<br />
organizations.<br />
Analyzer: Ministry of Finance in cooperation<br />
with Minsitry for Foreign Economic<br />
Relations and European Integration and<br />
Customs Administration<br />
Rok: III quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
14.Draft Law on Banks<br />
This Law will promote the solutions<br />
from the existing law, make adjustments to<br />
the international standards in this area (EU<br />
Directives and Recommendations (CAD III),<br />
Bazel II) and create prerequisites for banking<br />
market expansion by introducing foreign<br />
banks’ branches without legal entity status<br />
into the banking system.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Central Bank of Montenegro<br />
Rok: IIi quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
15. Draft Law on Amendments and<br />
Supplements to the Law on Central Bank<br />
of Montenegro<br />
This Law will add new and harmonize<br />
the existing solutions with the international<br />
practice respecting the needs of adjustment<br />
to the economic ambience and development<br />
plans of Montenegro.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Central Bank of Montenegro<br />
Rok: IIi quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
III. BYLAW ACTS<br />
1.Decree on appearance and contents<br />
of the control excise stamp, manner and<br />
procedure of approval, printing and issuing<br />
and manner of keeping records<br />
about issued, used and unused excise<br />
stamps<br />
This Decree will regulate, in accordance<br />
with the Law on Amendments and Supplements<br />
to the Law on Excises, appearance<br />
and contents of the control excise stamp,<br />
manner and procedure of approval, printing<br />
and issuing, manner of marking and keeping<br />
records about used and unused excise<br />
stamps.<br />
Analyzer: Ministry of Finance in cooperation<br />
with Tax Administration<br />
Rok: I quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
2.Decree on Amendments to the Decree<br />
for Customs Law Implementation<br />
This Decree will provide for a relevant adjustment<br />
of terminology, in accordance with<br />
amendments and supplements to the Customs<br />
Law.<br />
Analyzer: Ministry of Finance in cooperation<br />
with the Minsitry for Foreign Economic<br />
Relations and European Integration and<br />
Customs Administration<br />
Rok: III quarter<br />
Working group in charge:<br />
Commission for Financial System and<br />
Public Expenditures<br />
Commission for Economic Policy and<br />
Economic Development<br />
40
Activities of the minister<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Review of the most important<br />
activities of the Minister of<br />
Finance january- march 2006<br />
March 24, 2006 - Vienna: Credit Contract for Medical<br />
Equipment Procurement Funding signed between the<br />
Healthcare Fund of the Republic of Montenegro and Austrian<br />
«Erste bank»<br />
"Signing of the Credit Contract<br />
for Medical Equipment Procurement<br />
Funding between the<br />
Healthcare Fund of the Republic of<br />
Montenegro and Austrian «Erste<br />
bank», to the total amount of<br />
4.108.250,00 Euro".<br />
“Arrangement with the “ Erste<br />
bank” enabled the procurement of<br />
high quality equipment which<br />
should promote the Montenegrin<br />
Health System and increase the<br />
possibilities of our citizens’ medical<br />
treatment, said the Minister Lukšić.<br />
The arrangement is very favorable,<br />
approved according to the OECD conventional conditions, and it<br />
practically consists of a significant percentage of donation, because it<br />
is subsidized by the Austrian Government”.<br />
March 20, 2006 – The Minister of Finance Igor Lukšić held<br />
talks with the Ambassador of India to Serbia and Montenegro<br />
Lavania Prasad<br />
"The Minister Lukšić pointed to the results achieved by the Government<br />
in the framework of the overall Montenegrin economic<br />
system improvement, informed about the basic macroeconomic indicators<br />
and emphasized successive improvement, which was evidently<br />
achieved in the last three years. He said that realization of stabilization<br />
measures and structural reforms led to constant increase of real<br />
GDP growth in the last four years so that the preliminary estimated<br />
rate for 2005 amounted to 4,1% and informed that the consolidated<br />
budget deficit was around 2,7% of GDP in 2005, and aggregate<br />
consolidated expenditure in the last years decreased from over<br />
48% in 2003 to 46% in 2005 with the plan of 44,5% of GDP in 2006.<br />
In addition, the Minister Lukšić pointed to the successful finalization<br />
of arrangement with the IMF, good cooperation with the World Bank<br />
and underlined that he expected also the integration process acceleration<br />
in the forthcoming period".<br />
March 16, 2006 – Statement of the Minister of Finance Igor<br />
Lukšić following the session of the Government of the Republic<br />
of Montenegro on the occasion of Information on the Project<br />
"1000 housing credits", Proposal for keeping records of savers<br />
who are the citizens of Montenegro, who deposited foreign<br />
currency savings with the banks outside the territory of<br />
Montenegro and Analysis of the tax policy realization for<br />
2005.<br />
“Thousand of housing credits with the interest rate of four percent.<br />
The banks will calculate the interest rate of 6.4 percent and the<br />
Government will subsidize 2.4 percent. The credits will not be offered<br />
only to the Public Administration but also to the wider public”. Neither<br />
the European states have cheap housing credits”.<br />
March 14, 2006 – Receipts of the Republican Budget for the<br />
period from January 1 to February 28, 2006<br />
"Own source revenues in February 2006 are higher by 15,36% in<br />
comparison to the planned and by 52,33% in comparison to realization<br />
in February 2005.<br />
Higher realization in comparison to the plan has been evident in<br />
relation to all kinds of revenues (Personal Income Tax by 3,14%; Corporate<br />
Income Tax by 2,7 times; Tax on Transfer of Real Estate and<br />
Rights by 63,98%; Value Added Tax by 24,71%, Excises by 8,89%; International<br />
Trade and Transactions Tax by 27,19%, other republican<br />
taxes by 41,92%; fees by 27,67%; compensations by 53,74%).<br />
Higher realization in February 2006 has been evident in relation<br />
to all own source revenues in comparison to the same month of the<br />
previous year.<br />
Receipts of the Republican Budget for the first two months of<br />
2006 have been realized to the amount of 62.340.387,30 eur.<br />
Own source revenues earned to the amount of 61.650.449,41 eur,<br />
for January and February 2006 are higher by 9.009.524,97 eur or<br />
17,12% in comparison to the planned and by 20.626.372,96 eur or<br />
50,28% in comparison to the same period in 2005.<br />
Higher realization has been evidently achieved in relation to all<br />
kinds of taxes in this period (except for the Personal Income Tax -<br />
92,97%), court fees, compensation for games of chance organization,<br />
compensation for roads and revenues earned by the institutions’ performance<br />
of duties ".<br />
41
Activities of the minister<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
March 10, 2006 – Minister of Finance Igor Lukšić hosted a<br />
working lunch with the media representatives<br />
- TOPIC: Stabilization and Association Process and negotiations<br />
on Stabilization and Association of Montenegro to the<br />
European Union.<br />
“The Government will soon complete the draft Law on State Aid,<br />
which should introduce European standards to Montenegro. It represents<br />
another condition to be met in order to access the European<br />
Union. European regulations imply that it is allowed to assist the<br />
industrial branches as whole, not individual enterprises”.<br />
gorička bank and emphasized that it was very significant, both in the<br />
view of regaining the citizens’ confidence into the banking system<br />
and the overall reform and development of banking sector in Montenegro.<br />
He pointed out that this example proved that investment<br />
risks in Montenegro show tendency of significant decrease and that<br />
signing the agreement with one of the biggest European banks,<br />
which entered the Montenegrin market, would bring about increase<br />
in competition of domestic banking system, what was a justified belief.<br />
It was jointly assessed that Podgorička bank privatization was<br />
one of the most significant and very successful privatizations – implemented<br />
in the last period, as well as that, on the basis of the up<br />
to now results, numerous positive breakthroughs could be stated since<br />
«Societe General» arrived.<br />
Mart 3, 2006 – Parliament of the Republic of Montenegro<br />
at the session from March 1, 2006 adopted the Law on Referendum<br />
on State – Legal Status of the Republic of Montenegro,<br />
which was published in the "Official Gazette of the Republic<br />
of Montenegro“, No 12/06.<br />
Pursuant to the provisions of the aforementioned law (Article<br />
34), funds for implementation of the referendum shall be provided<br />
from the budgetary funds of the Republic. Apart from the funds for<br />
implementation of the referendum, the amount of 2.000.000,00 eur<br />
will be allocated from the budgetary funds not later than three days<br />
after the decision is made to call the referendum for the purpose of<br />
the referendum campaign funding for both referendum options<br />
(1.000.000,00eur for each referendum option). Funds for the referendum<br />
campaign funding are to be allocated to the referendum campaign<br />
entities, registered in accordance with the quoted law, who<br />
shall be obliged, pursuant to the provisions of Article 39 of the Law,<br />
to open a special giro account with an organ authorized to perform<br />
payment operations, which can not be used for other purposes but<br />
for collection of funds for the referendum campaign costs funding<br />
and for all payments linked to the referendum campaign costs funding.<br />
January 17, 2006 – Minister of Finance Dr Igor Lukšić took<br />
part in the Euromoney Conference in Vienna<br />
Minister Lukšić presented progress in achieving macroeconomic<br />
stability and economic indicators realization. He presented challenges<br />
in the framework of economic policy for the next period and emphasized<br />
the investment opportunities for the territory of Montenegro.<br />
It was underlined that important political processes in Montenegro,<br />
first of all, the referendum on independence in May, would not<br />
influence the economic developments and reform processes, which<br />
had no alternative.<br />
PR SERVICE OF THE MINISTRY<br />
Spokesperson, Ana Miljanić<br />
Senior employee I, Maja Bašić<br />
March 9, 2006 – The Minister of Finance Dr Igor Lukšić<br />
held talks with the delegation of the French Bank "Societe Generale"<br />
and Director General of "Podgorička bank" Mladen Rabrenović<br />
"Minister Lukšić expressed his satisfaction over the arrival of «Societe<br />
Generale» to Montenegro and successful privatization of Pod-<br />
42
Macrofiscal report<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
Report on macrofiscal developments<br />
in the 1st quarter of 2006<br />
The Report on macrofiscal developments in the 1 st quarter of 2006<br />
has been based on data under the financial statements of the budget of<br />
the Republic of Montenegro, extrabudgetary funds and local self-government<br />
units. The objective of the Report is to monitor realization of<br />
planned macrofiscal dimensions quarterly.<br />
Objectives of the public spending policy in 2006 include: continuation<br />
of the reforms implementation towards the accession to the EU;<br />
formalization of the grey economy; competition protection and<br />
improvement of competitiveness; companies and banks restructuring;<br />
and maintaining macroeconomic stability together with reduction of<br />
the public spending.<br />
Public spending in 2006 is projected to the amount of 785,26 mil.<br />
eur, or 44,64% of the GDP of the Republic of Montenegro. Deficit in<br />
public spending is projected to amount 38,77 mil. eur or 2,2 % of GDP.<br />
1. PUBLIC SPENDING<br />
Public spending in the first quarter of 2006 amounted to 174.13<br />
mil.eur. Deficit in public spending in the same period amounted to 1.99<br />
mil.eur, out of which Government budget deficit accounts for 5.49 mil.eur,<br />
Pension and Disability Insurance Fund - 0.63 mil.eur , Health Insurance<br />
Fund- 0.46 mil.eur and local self-governments - 0.69 mil.eur. The<br />
Employment Agency has made a surplus to the amount of 3.50 mil.eur.<br />
Deficit in public spending, together with net repayment of domestic<br />
and foreign debt, was financed from the privatization receipts to the<br />
amount of 3.59 mil.eur and by reduction of deposit by 7.99 mil.eur.<br />
The Table below shows public spending realized in the first quarter<br />
of 2006:<br />
Total deficit in public spending on cash basis amounted 1.99 mil.eur<br />
for the first quarter of this year. The deficit was realized as follows:<br />
Government budget: to the amount of 5.49 mil.eur and was covered<br />
by the privatization receipts to the amount of 0.65 mil.eur, and by<br />
reduction of deposit to the amount of 11.19 mil.eur.<br />
Pension and Disability Insurance Fund: to the amount of 0.63<br />
mil.eur and was covered by the privatization receipts to the amount of<br />
2.51 mil.eur.<br />
Health Insurance Fund realized deficit in the first quarter to the<br />
amount of 0.46 mil.eur and was financed by reduction of deposit at the<br />
amount of 1.77 mil.eur<br />
Employment Agency has made a surplus to the amount of 3.50<br />
mil.eur , and if income from the sold property to the amount of 0.42<br />
mil.eur is added to the above sum, the deposit amounts to 3.92 mil.eur.<br />
Local self-government has realized deficit to the amount of 0.69 mil.eur,<br />
which was financed by reduction of deposit to the amount of 2.06 mil eur<br />
and net repayment of domestic credits to the amount of 1.43 mil.eur.<br />
2. BUDGET OF THE REPUBLIC OF MONTENEGRO<br />
Current revenues of the Budget of the Republic of Montenegro in<br />
the first quarter of 2006 amounted to 102.88 mil. eur, representing an<br />
increase by 16,54 % as compared to those planned for the same period.<br />
As compared to the same period in 2005, the current revenues are higher<br />
by 42,65 %.<br />
Revenues realized in the first quarter are higher than those planned,<br />
providing conditions for budget execution as planned, provided that<br />
planned dynamics of increase is realized by the end of current year.<br />
Positive trend was particularly achieved with respect to the following<br />
types of revenues:<br />
Corporate Income Tax is higher by 1,77 mil. eur, or 89,05 % as<br />
compared to the plan for the same period,<br />
Real Estate & Rights Transfer Tax is higher by 0,3 mil. eur, or<br />
52,33 % as compared to the plan for the same period,<br />
Value Added Tax is higher by 13,51 mil. eur, or 36,05 % as compared<br />
to the plan for the same period in 2006, which is in line with<br />
increasing trend in collection of this type of tax,<br />
International Trade and Transactions Tax is higher by 2,19<br />
mil. eur, or 28,09 % as compared to the plan for the 1 st quarter of<br />
2006.<br />
Expenditures of the Budget of the Republic of Montenegro for the<br />
period from January to March 2006, are executed to the amount of<br />
109.10 mil. eur, being lower by 22.04 % than expenditures planned for<br />
the 1 st quarter of 2006.<br />
The following Table shows a comparative review of receipts and<br />
expenditures of the Budget of the Republic of Montenegro realized in<br />
the 1 st quarter of 2006.<br />
3. PENSION AND DISABILITY INSURANCE FUND<br />
Review of receipts and expenditures realized by the Pension and<br />
Disability Insurance Fund in the 1 st quarter of 2006 is given in the following<br />
Table:<br />
Current revenues of the Pension and Disability Insurance Fund are<br />
realized to the amount of 26,57 mil. eur, being lower than planned by<br />
4,13 mil. eur. In the first quarter of 2006, contributions were collected<br />
to the amount of 26,26 mil. eur, being lower than planned by 4,24 mil.<br />
eur. Transfers from budget amounted to 13,14 mil. eur, being lower than<br />
planned ones by 4,19 mil eur.<br />
Total spending by the Pension and Disability Insurance Fund<br />
amounts to 40,72 mil. eur, being lower than planned by 7,31 mil. eur,<br />
mainly due to the Fund’s incapability to fully meet its liabilities to the<br />
Health Insurance Fund with respect to the health care of pensioners.<br />
Deficit of the Pension and Disability Insurance Fund amounted to 0,63<br />
mil. eur.<br />
4. REPUBLIC HEALTH INSURANCE FUND<br />
Total revenues realized by the Health Insurance Fund amounted to<br />
17,59 mil. eur, which is lower than planned by 1.77 mil. eur. Revenues<br />
from contributions amount to 16.20 mil. eur, being lower than planned<br />
by 2.96 mil.eur, while received transfers amount to 4,73 mil. eur, being<br />
lower than planned by 3.86 mil.eur.<br />
Review of revenues and expenditures of the Health Insurance Fund in<br />
the period from January to March 2006 is given in the following Table:<br />
5. EMPLOYMENT AGENCY OF MONTENEGRO<br />
Total receipts of the Employment Agency of Montenegro amounted<br />
to 9.07 mil. eur, being higher than planned by 57.10% mil. eur. Revenues<br />
from contributions amount to 1.08 mil. eur, being lower than planned<br />
43
Macrofiscal report<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
44
Macrofiscal report<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
45
Macrofiscal report<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
by 18.05 %. Other revenues amount to 2.32<br />
mil.eur, out of which 2.22 mil.eur is related<br />
to enforcement of claims from the previous<br />
year and 0.09 mil.eur is related to yield on<br />
capital. Received transfers amount to 1.39<br />
mil.eur mil. eur, being in line with the plan<br />
for the 1 st quarter of 2006. The Agency made<br />
a surplus to the amount of .50 mil. eur,<br />
which, together with revenues from the sale<br />
of property amounting to 0.42 mil.eur, led to<br />
increase of deposit to the amount of 3.92<br />
mil.eur.<br />
Review of receipts and expenditures of<br />
the Employment Agency of Montenegro in<br />
the 1 st quarter of 2006 is given in the following<br />
Table:<br />
6. LOCAL SELF-GOVERNMENT<br />
Current revenues of the local self-government<br />
amounted to 15.22 mil.eur, in the<br />
first quarter of 2006, being lower by 13.84 %<br />
than planned for the first quarter of 2006.<br />
Current expenditures amounted to 16.10<br />
mil.eur, being lower by 10.94% than<br />
planned for the first quarter of 2006. Thus,<br />
the deficit was realized to the amount of<br />
0.69 mil.eur, which was financed by reduction<br />
of deposit.<br />
7. INDUSTRIAL PRODUCTION<br />
Industrial production in Montenegro in<br />
March this year has been increased according<br />
46
Macrofiscal report<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
to all indicators as follows: comparing to<br />
average production per month as of last year-<br />
6,8%; comparing to previous month of this<br />
year - 11,3%; comparing to the same month<br />
of the last year - 3,0% and for the period<br />
from January to March this year as compared<br />
to the same period last year - 4,4%.<br />
9. COST OF LIVING<br />
8. RETAIL PRICES<br />
Retail prices in the Republic of<br />
Montenegro in March 2006 were only higher<br />
by 0,1% as compared to February.<br />
Retail prices’ rate of growth in March<br />
2006 was higher by 0,5% as compared to<br />
December, or inflation for the first three<br />
months this year is only 0,5%.<br />
Increase of retail prices of items and services<br />
for personal consumption i.e. living costs<br />
in March 2006 was higher by 0,2% as compared<br />
to February.<br />
10. EARNINGS<br />
Average earnings in March 2006 in<br />
Montenegro amounted to EUR 362,93, while<br />
average earnings without taxes and contributions<br />
amounted to EUR235,63.<br />
As compared to February, average earnings<br />
without taxes and contributions were<br />
47
Macrofiscal report<br />
BULLETIN OF THE MINISTRY OF FINANCE/JANUARY-MARCH 2006<br />
increased in March by 2,32%.<br />
Given the fact that the living costs in<br />
March this year were increased by 0,2% as<br />
compared to February, real earnings in our<br />
Republic were increased by 2,12% in March<br />
this year.<br />
CONCLUDING REMARKS<br />
Public spending in the first quarter of<br />
2006 was realized to the amount of 174,13<br />
mil. eur, being lower than planned by 17 %.<br />
Deficit of public spending in the first<br />
quarter of 2006 was realized to the amount<br />
of 1.99 mil. eur, being lower than planned, as<br />
follows: Government Budget- 5,49 mil eur;<br />
Pension and Disability Insurance Fund- 0,63<br />
mil. eur; Health Insurance Fund- 0,46 mil.<br />
eur; and local self-government - 0,69 mil. eur.<br />
Employment Agency made a surplus to the<br />
amount of 3,50 mil. eur.<br />
Consolidated public spending in the first<br />
quarter of 2006 was realized to the amount<br />
of 174,13 mil. eur, and was financed from:<br />
taxes to the amount of 103,00 mil. eur; contributions<br />
to the amount of 43,55 mil. eur;<br />
stamp duties and fees to the amount of 4,81<br />
mil. eur; charges to the amount of 6,00 mil.<br />
eur; and other revenues (including receipts<br />
from loan repayment) to the amount of<br />
14,78 mil. eur. Realized revenues as compared<br />
to planned amounts show that in the first<br />
quarter of 2006, revenues from taxes, stamp<br />
duties and fees and receipts from loan repayment<br />
and funds transferred from the preceding<br />
year were higher than planned, while revenues<br />
from contributions and charges as well<br />
as other revenues were lower than planned.<br />
High level of tax revenues is based on value<br />
added tax, corporate income tax and customs<br />
duties collection.<br />
Macroeconomic developments in the<br />
first quarter of 2006 have positive trend.<br />
Industrial production for the period from<br />
January to March 2006 is higher by 4,4% as<br />
compared to the same period in 2005.<br />
Cumulative growth rate of retail prices is<br />
higher by 2,5% in the period from January-<br />
March 2006 as compared to the same period<br />
last year. Living costs in February 2006 are<br />
increased by 2,9% as compared to same<br />
month in 2005. As living costs were increased<br />
by 0,3% in February 2006 as compared to the<br />
previous month, real earnings in<br />
Montenegro were increased by 11,87% in<br />
February 2006.<br />
The Ministry of Finance will undertake<br />
measures for efficient collection of public revenues,<br />
particularly with respect to personal<br />
income tax and customs duties, as well as for<br />
a more regular payment of transfers in the<br />
public spending system.<br />
48