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Economic Freedom - Doing Business in Montenegro Doing Business report is developed by The World Bank and implemented by the International Financial Corporation (IFC). This report measures and tracks changes in regulations affecting 10 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business reports are prepared annually and they present quantitative indicators on business regulations and the protection of property rights that can be compared across 183 economies, from Afghanistan to Zimbabwe.
This year’s Doing Business Report 2012, reported that Montenegro successfully eliminated several business start-up procedures by introducing a single registration form to be submitted to the tax authorities. Also, an amendment to Montenegro’s Law on corporate income tax removed the necessity for businesses to make advance payments and also abolished the requirement to pay construction land charges. Montenegrin customs administration simplified trade by eliminating the requirement to present terminal handling receipts for the export and import of goods. This report was approved on June 1, 2011 (except for the paying taxes indicators, which cover the period January–December 2010). Based on the data submitted in June 2011, Montenegro is still at 56th place out of 183 economies. In the area of starting business, Montenegro came 85th in 2010, while now it is ranked in 47th place, immediately ahead of Croatia (67), Serbia (92) and Bosnia and Herzegovina (162). The placement position in this area relates to the number of steps and the number of days required for obtaining a work license. Dealing with construction permits is the area in which Montenegro has the lower rang in 2011 (173th place) starting from 2009. Problems in this area are related to the cost of obtaining a permit, the procedures involved, the number of days required etc. Montenegro will have to make more reforms in this area in order to keep track of the global trends. The registration of property has also been a problematic area for Montenegro over the last few years due to lack of reforms in this area. The situation is improved slightly this year, and actual rank of Montenegro is 108th place. The placement position of Montenegro is lower than the position of surrounding countries mostly due to a larger number of procedures and higher expenses needed in order to register the property. In the area of protection of investors Montenegro is in 29th place this year. However, it was ranked in 24th place last year. Montenegro is in the better position than most countries in the region however, there is need for continuous improvement in this area in order to retain existing investors and to attract new ones. In the area of paying taxes, Montenegro is ranked in 108th place. The major problem is not the amount of taxes paid, but rather the number of days required to pay tax and also the number of payments a company is required to make during a one year period. In 2011 Montenegro made paying taxes easier and less costly for firms by abolishing a tax, reducing the social security Doing Business 2012
contribution rate and merging several returns into a single unified one. Also, an amendment to Montenegro’s corporate income tax law removed the obligation for advance payments and abolished the construction land charge. In the area of trading across borders, Montenegro is ranked in 34th place (the best rang in the region). Montenegro’s customs administration simplified trade by eliminating the requirement to present a terminal handling receipt for exporting and importing. Indicators on enforcing contracts measure the efficiency of the judicial system in resolving commercial disputes. In this area Montenegro recorded a rank as 133rd. Problems in this area relate to a number of procedures that need to be improved, namely those concerning the number of days, as well as the level of costs, when considered on the percentage basis of a claim. A procedure is defined as any interaction, required by law or commonly used in practice, between parties or between a party and a judge or court officer. This includes the steps taken towards filing and serving a case, the steps taken to go to trial and to obtain judgment, along with the steps required to enforce any judgment. The reforms are necessary in this area in order to improve the position of actual rank of Montenegro. Regarding resolving insolvency, the report studied the time, cost and outcome of insolvency proceedings involving domestic entities. During last few years no regulations have either been changed or newly adopted. There is a possibility that some new regulations will be adopted in this area, but not until January 2012. In this year’s report, Montenegro is ranked in 52nd place.
Table 1: Doing Business Rank of Montenegro (2010/2011/2012) Topic Rankings Ease of Doing Business Starting a Business Dealing with Construction Permits Getting Electricity Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Resolving Insolvency
DB 2012 Rank
DB 2011 Rank
DB 2010 Rank
56 47 173 71 108 8 29 108 34 133 52
56 46 170 68 117 8 28 125 35 134 48
71 85 160 na 131 43 27 145 47 133 44