Upon gaining independence in 1978, Dominica established a single-chamber parliament under its constitution. The House of Assembly has 21 elected and 9 appointed members. The parliament elects a president, who acts as head of state and elects the prime minister and the cabinet. The country is split into 10 administrative districts, called parishes. Each is named after a Roman Catholic saint.
In the immediate aftermath of independence from the United Kingdom in 1978 Dominica witnessed considerable political turbulence. Stability took hold between 1980 and 1995, when the Dominica Freedom Party (DFP), led by Eugenia Charles, won 3 consecutive terms in office. After a victory by the United Workers Party (UWP) in 1995, the Dominica Labour Party (DLP) and DFP formed a coalition government in early 2000. The sudden death of DLP leader and prime minister Rosie Douglas in October that year led to former minister of communications and works, Pierre Charles, taking over the position of prime minister.
The DLP has been traditionally more left-wing in outlook than the conservative DFP, which has favored strong links with the United States and a robust, pro-business approach to government. The coalition government of 2000 was hence a pragmatic response to the popularity of the UWP, which draws much of its support from the island's banana farmers. In reality, there are few major policy differences between the 3 main parties, with all supporting the beleaguered banana industry and encouraging diversification and direct foreign investment. The main political difference between the DLP-DFP coalition government and its UWP predecessor has been the decision to abandon plans for a new airport and hotel development in the northeast on the grounds of cost and environmental impact.
The government has a direct impact on Dominica's economy as a large employer and because it establishes the legal and regulatory framework for foreign investment. It raises revenues through a mixture of income tax , indirect taxes , and fees levied on offshore companies. In July 2000, the government announced that it would replace most existing indirect taxes levied on consumption and imported goods with a single value-added tax (VAT).