Renewed (fourth) Proposal of Measures by the MEF

The Montenegrin Employers’ Federation (MEF) prepared the Innovated (fourth) Proposal of MEF measures for economic support, and submitted it to the Ministry of Economic Development and the Secretariat of the Competitiveness Council.

It was created on the basis of the expressed needs of employers – MEF members, as well as the outcomes of the MEF second survey on the effects of COVID-19 crisis on business operations of Montenegrin employers, conducted with technical support of the International Labor Organization (ILO).

The new MEF position document was submitted for the needs of the meeting that the Minister of Economic Development, Mr. Jakov Milatović, held on December 18, 2020 with business associations. The topic was the analysis and further elaboration of a package of support measures for the economy, with a focus on those that could be implemented in the short term. On behalf of the MEF, the meeting was attended by the Secretary General, Ms. Suzana Radulović.

In addition to the measures that need to be taken in the short term, the MEF document contains an overview of the following proposals for

Urgent Measures:

1. Establish a Guarantee Fund in the amount of EUR 100 million, in order to provide state guarantees of at least 70% of the amount of loans to business entities that had a drop in income of more than 30% due to the epidemic and the introduction of temporary measures. This would create conditions for commercial banks to create more favorable credit lines, with easier access to credit and lower interest rates.

• State and Central Bank guarantees for loans provided by IDF and commercial banks should be determined in proportion to market share of each bank in Montenegro, and limited in order not to exceed more than 40% of the total amount of credits provided by the bank.
• The maximum individual loan amount that the state would guarantee should be limited to € 300,000, in order to enable as many business entities as possible to obtain the necessary funds;
• Approval of loans in the amount of more than € 300,000 should be conditioned by the approval of the same by the Government of Montenegro or the relevant ministry;
• The right to loans under these conditions should be provided to economic entities that had a decline in income of 30% or more compared to 2019;
• In the framework of the above mentioned IDF arrangement with commercial banks, The Government and the Central Bank should, in advance, define precisely the terms: interest rate (which has to be fixed), grace period (of minimum 12 months), and repayment deadline (of minimum 36 months).

2. Entrepreneurs and companies that had a decline in income of 30% compared to 2019 due to epidemic and temporary measures, should be entitled to a wage subsidy in the amount of 100% of the minimum net wage until April 1, 2021, or longer – depending on the epidemiological situation and the improvement of business conditions.

3. Provide subsidies for the purchase of fiscal devices and equipment to economic entities that will have to replace the existing tax cash registers in accordance with the requirements of the new Law on Fiscalization in Trade in Products and Services (effective from January 1, 2021).

4. Ensure deferred payment of customs and VAT up to 90 days. This should be a continuous measure applied in cycles until business and cash flows are normalized.

5. Provide urgent amendments to the Law of the Value Added Tax.

• Increase the threshold for a compulsory VAT registration from 18.000 EUR of turnover to (at least) 30.000 EUR. Entrepreneurs and micro enterprises currently in the worst situation when it comes to business sustainability would have the major interest from this increase. The day they enter the VAT system, their goods and services become 21% more expensive, entering a highly demanding and uncertain market game with large companies whereby the majority of them end up facing business difficulties and illiquidity. These problems have existed before and have intensified in the new circumstances.
• The possibility of charging the VAT after the invoice is paid should be introduced for all tax payers. This amendment would also mean a special kind of “support” and easing business of small enterprises (having in mind that, inter alia, it means defining the maximum amount of turnover as a condition for approval of such VAT payment system).

6. Adopt a special law that would regulate labor-legal relations in times of extraordinary circumstances or make urgent adjustments of the Labor Law aligning its provisions to respond to (extraordinary) circumstances caused by the COVID-19 epidemic (e.g. upgrade the article on termination of work, simplify the procedures for introduction of work from home, shorter working hours etc.).

Note: The Renewed (fourth) Proposal of Measures by the MEF to support the business – version in Montenegrin language – can be downloaded at THIS link.