Macedonia - Politics, government, and taxation

Following its declaration of independence in 1991, Macedonia developed a consensual democratic multiparty system. Main parties include the ruling Internal Macedonian Revolutionary Organization-Democratic Party for Macedonian National Unity (VMRO-DPMNE), a moderate nationalist and reformist party with deep historic roots and liberal positions on economic and international issues; the Democratic Alternative (DA), a liberal party and former VMRO-DPMNE coalition partner; the Social Democratic Alliance of Macedonia (SDSM, reformed communists); and the 2 ethnic Albanian-dominated organizations, the Democratic Party of Albanians and the left-wing Party for Democratic Prosperity. Unlike other parts of the former Yugoslavia, Macedonian politics are not polarized along ethnic lines. Although there have been tensions between the Albanian minority and the government, the kind of ethnic violence seen elsewhere is rather unlikely, and Macedonia has occasionally compared itself with Switzerland as a land of peaceful ethnic co-existence.

The state still has considerable influence over the economy, but, since independence, the government has made progress in boosting private initiative and creating a viable private sector through its restitution and privatization program and by attracting foreign direct investment . The first step was the restitution (return) of nationalized property to former owners, considered a serious political gain by the VMRO-DPMNE, the first center-right reformist government since the country's independence. The privatization agency, a body overseeing both restitution and privatization, reserved a large cash fund to compensate the heirs of former property owners if restitution proved physically impossible. Out of 94 firms that were nationalized (claimed by the state) by the communist regime, restitution of physical assets was possible in 38 cases, and shares were distributed to the heirs in another 24 firms. Privatization of state assets is another, much more time-consuming, priority of the government, and it is being carried out through capital market offerings, mass privatization, and cash deals. The offerings on the capital market are very limited; in mass privatization, citizens and company employees are eligible to receive free vouchers for company shares; cash deals are by far the most attractive proposition for foreign direct investors. Taxes constitute 41 percent of the total government revenue, and continuing tax reform is aimed at reorienting taxation from direct towards indirect taxes and the value-added tax (VAT), which are believed to be more business-friendly.