The Tax Administration and the Pension and Disability Insurance Fund will launch the online application “Is your employer paying your contributions?” and the service for online checking of M4 form, without the need to visit the institutions. The importance of this service is reflected in the fact that the debt of 100 largest debtors in the month of October for taxes and contributions is as high as EUR 67 million.  

The project implementation should start in January, to be completed in August 2020, when the application will be available to all employees in Montenegro.

Launching of this service, which has long been available in the EU countries, is one of the commitments from the National Action Plan for the Implementation of the Open Government Partnership (OGP) Initiative, adopted by the Government at its last session.

The plan of commitments adopted before the deadline: The entire project is coordinated by the Ministry of Public Administration, and the Action Plan was adopted a month and a half before the official deadline.

This is important information, given that Montenegro was indirectly warned, in the middle of the year, that it could be excluded from the Open Government Partnership (OGP) organization due to inactivity, since it had not submitted an action plan in three cycles.

It is even more significant that this service will stop the practice of non-payment of taxes and contributions for wages, which is evident in the private sector, and it will also be an attempt to stop the very negative trend of payment of the minimum contributions, which is a serious threat to the sustainability of the Pension and Disability Insurance Fund.

The 100 largest debtors owe EUR 67 million for contributions: According to the latest data from the Tax Administration, the total amount owed by the 100 largest debtors for taxes and contributions is EUR 67.1 million.

At the top of the list is Montenegro Airlines (MA), whose total debt for taxes and contributions for employees is about EUR 19,159,000.

After MA, the next place in the list of the largest debtors for taxes and contributions belongs to the Coal Mine Pljevlja with the total debt amount of EUR 6,091,336.

The Railway Transport of Montenegro owes EUR 4,486,211 for taxes and contributions, and the company 13. jul Plantaže, undergoing reprogramming, owes EUR 3,760,802.

For outstanding taxes and contributions, Vektra Boka Herceg Novi owes EUR 2,795,770. A particular problem is the fact that many private companies have not paid their contributions for years, and many of the workers cannot get their well-deserved retirement.

Reform initiated because of deficit: Because of the high deficit in the Pension and Disability Insurance Fund, the Government has initiated the unpopular reform of the pension system, which has practically eliminated early retirement and set a rather high retirement age for women – 64 years of age.

In addition, the average pension is projected to be about 55 to 56 percent of the average net wage, which is far less than the 80 percent as it used to be in the former SFRY. Currently, average pension in the month of September in Montenegro was about EUR 285, while the average net wage amounted to about EUR 512.

Payment of minimum contributions – a noose around the neck of the pension system: The increase in pension expenditure, which is close to EUR 35 million for the State per month, was not followed by employers’ tax discipline. The rule of business for many private employers is to pay the minimum taxes and contributions for their employees, and the rest of the money earned directly to the employee in cash.

Such a style of doing business causes double damage: both to the state and pension budgets – because it increases the deficit – and to the employee him/herself who will end up with minimum pension.

This deficit is handled by having this amount, which is mostly over EUR 110 million, transferred from the Budget to the budget of the Pension and Disability Insurance Fund.

No calculations have been made in Montenegro as to the exact amount the State is losing per year because of the fact that employers pay only minimum contributions or pay no contributions at all. The estimates range from about twenty-five to thirty million Euros, according to the unofficial information from the Tax Administration, up to 90 million Euros, estimated several years ago by the then Ministry of Labour and Social Welfare, Mr. Predrag Bošković.

We can see the depth of this problem in the fact that the employers have complained about high tax burdens on labour for the past decade.

The Action Plan specifies that the launching of the online application “Is your employer paying your contributions?” and the service for online checking of M4 form will cost about EUR 20,000, and that the service will be available on the e-portal and the websites of the Tax Administration and of the Pension and Disability Insurance Fund.

These two institutions also have the obligation to prepare statistical data on the use of services and to publish them in the Tax Administration Annual Report.

Launching of the online application will certainly be an incentive to finally put this area in order, and the data on the reduced tax debt for this basis and reporting of employers who do not settle their obligations regularly could be used as an evaluation indicator.