Competing ethno-centered strategies over the local fiscal resources can seriously undermine political and economic stability of ethnically diverse societies. This study investigates the causal link between ethnic diversity and local government finances by focusing on the case of Macedonia. In particular: whether fiscal decentralization is used as a part of broader strategy for prevention and mitigation of inter-ethnic conflicts. The main argument is that low level of political culture and inter-ethnic tensions are frustrating the development of the government policy along a course of decentralization. The study confronts two emerging scenarios regarding decentralization and inter-ethnic relations. The first scenario puts the economic development at the forefront for country’s stability and treats decentralisation as a driving force to achieve this goal. Ethnic problems are expected to be solved along this path as rising economic stability reduces the inter-ethnic tensions. In the second scenario, the inter-ethnic stability is the main pillar of the country’s stability, which is expected to be accomplished through decentralisation. The paper analyses and synthesizes pros and cons of two scenarios from administrative, legal, political and economic perspectives.

Although the current post-decentralization decade offers much more tranquility for practitioners of the fiscal decentralization, decentralization scholars should not fall asleep. Some of the awakening questions are: where is the decentralizing limit? What is the likelihood of fiscal decentralization reconstructing the intergovernmental relations in a way that leads to federalization of unitary countries in Southeast Europe? Even though we focus on the Macedonian experience, the main findings largely hold for the entire region. The study aims to provide new, interdisciplinary understanding of the implications and perspectives of decentralization, overcoming the limitations when adopting a purely legal, economic or political perspective.

Open door tax policies have been offered as a key ingredient for attracting foreign capital in the region of South Eastern Europe. In the last decade, these countries have strived to respond to the global tax competition and to create attractive business environments for economic growth and foreign direct investments (FDI). Promptly, seven of nine South Eastern European countries introduced flat taxes for corporate income, and re-modeled fiscal surrounding for FDI. Were these transformative policy decisions, or just cosmetic alterations to the existing conditions for doing business? How much impact have the flat tax and tax incentives had on the FDI? This article analyses open door tax policies, in particular the nexus between, on the one hand, the flat tax and related tax incentives, and on the other, the FDI. A comparable measure of each country’s implementation of open door tax policy is created, and countries are analysed separately, with focus on the legal and economic aspects. Innovative methodology of awarding points to each determinant of the open door tax policy is applied in combination with measuring of political and legal variables, that drives the conclusion about the significance of each factor for FDI in the Region