Yugoslavia - Politics, government, and taxation

Slavic republics had been separated for much of history by larger national powers, such as the Austro-Hungarian Empire in the 19th century. After World War II, Slovenia, Croatia, Serbia, Macedonia, and Montenegro, and Bosnia and Herzegovina were united. But the federation of these republics was far from easy. Although mostly Slavic republics, the populations in the republics were a blend of people with strong, differing cultural affinities that did not match territorial boundaries. By the 1990s, tensions between the republics led to the dissolution of Yugoslavia. The break was not clean, however, because people within the republics struggled to redraw the territorial boundaries along cultural lines. Ethnic Serbs in Bosnia and Herzegovina, for example, wished to join with Serbia. War between many of the republics led to severe political and economic disruption in the area.

In 1992, Serbia and Montenegro adopted a new constitution that set up a parliamentary government with a bicameral (2 house) legislature. Despite the new government, President Milosevic headed a dictatorial regime from 1987 to 2000. Milosevic's regime is responsible for much of the devastation caused by years of war from 1991 to 1999.

Following the presidential elections in September 2000, a popular uprising toppled Milosevic. The new president, Vojislav Kostunica, pledged a return to democracy and the rule of law. He promised to begin much needed reforms and to seek full reintegration into Europe. Furthermore, he secured Yugoslavia's return to the United Nations (UN) and admission to the International Monetary Fund (IMF).

Parliamentary elections in December 2000 brought to power the Democratic Coalition of Serbia (DOS), a reformist union of 18 parties and a trade union, led by Zoran Djindjic of the Democratic party, with 64 percent of the vote. Milosevic's Socialist Party of Serbia that ruled along with the ultra-nationalist Serbian Radical Party and the Yugoslav United Left garnered only 14 percent of the vote.

Recovery is expected to be long and painstaking. The DOS favors swift change, but Kostunica holds that it would jeopardize stability before a new legal framework is instituted. But the squabbles between the former Yugoslav republics are far from over. The UN Interim Administration Mission in Kosovo (UNMIK), established after the 1999 war, is now the authority in what was the former Autonomous Province of Kosovo and Metohija, and Albanian separatists are wreaking havoc in south Serbia, adjacent to Kosovo. Montenegro, which boycotted federal elections, continues its push toward independence. Bosnia and Herzegovina and Serbia, Serbia and Montenegro and Croatia, and Serbia and Montenegro and Macedonia have yet to resolve respective territorial issues.

The government's role in the economy is significant, as state enterprises owned more than 80 percent of the capital, and the private sector accounted for only 37 percent of GDP in 1996. Federal and republic governments have retained many formal and informal levers of authority over the economy, export and import licenses, credit, and jobs. The Montenegrin government has been more reform-oriented, and its law establishes tax exemptions, tax relief, and other privileges for foreign business activity.