The recent decision by the Montenegrin Parliament to increase VAT on the tourism sector from seven to 15 percent has raised significant concerns among tourism professionals. Dragan Ivančević, a member of the Tourism and Hospitality Association in the Chamber of Commerce of Montenegro, warns that this tax hike could severely impact Montenegro’s tourism industry.
Ivančević points out that the increase targets organized tourism, which had been anticipated to support a six-month or seven-month tourist season. He describes this move as potentially devastating for the industry, making Montenegro the European country with the highest VAT on accommodation. Historically, Montenegro’s VAT for accommodation has never exceeded seven percent. The increase, according to Ivančević, could drive tour operators to seek alternative destinations, particularly because Montenegro’s prices have already been criticized as high and its quality as inadequate.
He explains that adjusting prices in the tourism sector is not straightforward, especially since most arrangements, including hotel bookings, airline tickets, and charters, are pre-contracted. This will likely lead to travel organizers avoiding Montenegro as a destination.
Ivančević stresses that the Chamber of Commerce’s Tourism and Hospitality Committee has been actively monitoring the tourist season, from preparation to problem resolution. They have persistently sought a cooperative approach with government authorities to address industry issues.
However, Ivančević expresses frustration over the lack of effective communication with previous and current ministries, noting that the new Minister of Tourism, Simonida Kordić, has yet to engage meaningfully on these matters. He fears that it is too late to mitigate the damage now that the Parliament has made its decision. This tax increase could hinder Montenegro’s competitiveness in the Mediterranean market, where supply exceeds demand. To remain competitive, Montenegro needs to maintain current tourism structures and attract higher-paying clients, rather than the lower-paying ones observed this summer. He believes that the industry may struggle to cope with this new challenge.
Furthermore, Ivančević highlights that most tourism arrangements from Western European markets have been finalized at existing prices, and the VAT increase of over 100 percent is unsustainable for the sector.
He questions the government’s strategy in light of the numerous challenges facing the tourism sector, suggesting that the focus should be on improving the quality of the destination rather than imposing burdensome taxes. He emphasizes that no other European tourist destination has such a high VAT rate on accommodation.
Finally, Ivančević notes ongoing issues within the industry, including inadequate communication, waste management problems, and high levels of informal economy activities, especially in private accommodation. He estimates that a significant portion of revenue is lost to the gray economy, which remains a critical, unresolved issue.
