Serbian Reforms II:

Jurisdictional Confusion & Property Multi-Rights

 

By M. Bozinovich

 

Taxation with representation has become a hallmark of a modern democracy that has elevated the governed from the grips of a political arbitrage into a rule of law. For example, in the American Declaration of Independence we read grievances leveled against the governing of King George charging him “For imposing Taxes on us without consent:” This grievance was remedied in the US Constitution in Section 8 where “The Congress shall have Power To lay and collect Taxes…” on premise that citizens vote for their Congressional representatives.

 

While Section 8 of the US Constitution refers to the Federal government, taxation with representation is also applicable to the lower governmental levels such as State, County, or City. Each one of these units has its own unique taxation scheme that is autonomous from all other levels of government because they have a distinct and autonomous set of representatives. This in turn, precludes other governmental jurisdictions from legislating their taxation affairs.

 

The implication of the taxation with representation in a multi-jurisdictional modern democracy is that it requires a rigid differentiation between a jurisdictional limit and the property ownership limit. For example, although the jurisdictional territory of an American State is clearly defined and it can levy its own taxes thereupon, the property that such state owns, however, is not the entire area inside these jurisdictional borders. Some of the land inside a state that is not owned by private citizens may be federally owned, county owned or city owned. In other words, all of the territory inside a jurisdictional border is owned by someone be it a private individual, corporation, city, county, state or federal government and the state has a jurisdictional duty to represent them but not to make property claims over them.

 

Supposing, say, a federal government, having jurisdiction over entire United States, decides to build a military base on a property that is County owned, the federal government must consult the county to either buy the land, lease the land… In other words, just because the highest government level has a jurisdiction over entire country it cannot arbitrarily violate property rights reserved to lower level government branch. The axiomatic corollary of this also proceeds: just because the highest government level has a jurisdiction over entire country it cannot arbitrarily coerce its lower siblings to levy and administer taxes for them.

 

Serbian Jurisdictional Confusion

 

Serbian state and in the large measure the public remain confused between the jurisdictional limit of government and the property ownership limit of government.

 

For example, tax collection in Serbia is a trickle-up method where the lowest level of government collects all taxes and a percentage of collected revenue is subsequently paid to the upper level of government. In effect, the lowest level of government, the Opshtina, acts as a tax collector and then pays a ransom to the upper level. The next level, the city, accrues this ransom money and pays a percent to the state. In turn, state reserves a right to arbitrage the percentage it wants between its constituent cities. Thus, Belgrade for example paid until recently, a 3% tax surcharge not applicable to other cities in Serbia.

 

This trickle-up tax scheme as an arbitrary and coercive jurisdictional limits extension of the State over its lower siblings explicitly violates modern democratic principle of taxation with representation. State must levy a tax on the people it represents. Serbian state levies taxes upon cities. Therefore, Serbian state does not tax whom it represents.

 

Serbia’s confusion on the tax levy derived from jurisdictional limits confusion is probably more grisly if placed in converse order. Entities that pay taxes to the State must be represented by it. Serbian cities pay taxes to the State. Therefore, Serbian State does not represent its people.

 

Two arguments can be rendered against these conclusions.

 

First, people are represented on all levels of government and for the sake of tax collection simplicity, efficiency and taxpayer convenience, the lowest level of government in Serbia, the Opshtina, has been legislated to collect all taxes in the country. However, the power of the higher level of government to legislate jurisdictional issues of the lower one is an abolition of the functions of the lower one. Suppose people of Opshtina do not wish to collect taxes for the State. State legislates that Opshtina must collect. Therefore, State violates wishes of the represented people.

 

Second argument against is that Opshtina is located inside a city and city inside a State, therefore the State can legislatively mandate functions of the lower levels of government. If so, then the legislative mandate upon the lower levels of government abolishes them. Practically, one asks what is the purpose of Opshtina and its autonomous set of representatives if the State reserves a right to legislate their actions.

 

Problem of Property Multi-Rights in Government Sector

 

Property claims by the upper level government against lower one are a common practice in Serbia. The confusion is more pronounced if contrasted against the Serbian countryside.

 

Traditionally, the smallest social unit in Serbia is a village. Village(s) becomes part of Opshtina, Opshtina part of the city that is nearby and cities are part of the state. Each one of these jurisdictional units, since they exist, must have their own territorial limit. Presumably then, they will exercise their jurisprudence within its own limits because they have a distinct and autonomous set of representatives.

 

However, a case of a villager illustrates the commonality of the property claims by the upper level government against lower one.

 

A villager in Serbia fresh from being a guest worker in Germany observes that part of its village has hills made up of plentiful fine-grained white sand and proposes to buy the property from the village, invest in the machinery and create a sand mill. Village vote refuses under grounds that it is the village property and they wish not have any industry there because it will infringe on access rights of other property owners nearby. The villager then approaches the Opshtina proposing that they sell it to him. Opshtina consults with the forestry department that sells him the property. The outcome: Opshtina arbitrarily reserved property rights over the village and assigned village property to a private agent - against the will of the village at that! To further complicate the matter, the sand mill issues shares and attracts private investors.

 

Problem of Fluid Borders

 

Questioning anyone in Serbia as to where exactly are the borders of a given city that define its jurisdictional limit leaves the officials and the public puzzled. Aside from general contempt against such question, it is inescapable to notice, for example, that Belgrade has at least twice in the last 20 years expanded its jurisdictional border by adding additional Opshtinas to its collection.

 

A second paradox of fluid borders is that in large cities Opshtina is inside a city - which is consistent with diffusion of a broad jurisdiction into smaller autonomous units. However, along Serbia's countryside jurisdictional border of Opshtina may be larger then the city itself. For example, a village located 15 kilometers from the city is considered to belong to that city's Opshtina but yet the official Welcome to the City sign is located 2 kilometers from the city buildings. In case of Belgrade, this sign has had to been moved at least twice outwardly.

 

Delineating the Confusion

 

The described bedeviling set of jurisdictional and property rights of Serbia's governmental sector trace their causing agent to the improper comprehension and application of the modern democratic principle of taxation with representation.

 

Jurisdictional problems. Taxation with representation in a multi-jurisdictional democracy needs rigid and unmovable jurisdictional borders. Within those rigid jurisdictional borders an autonomous set of distinct representatives must be left alone to establish their own taxation policy. Their job is not to collect taxes for others but to collect taxes for themselves mindful of the will of those whom they represent. In Serbia, however, jurisdictional borders are fluid, autonomous set of representatives in it are legislated to accept a taxation policy of the State, and their job ends up being the State tax collector. City-Opshtina jurisdictional size and no jurisdictional authority for villages further aggravate the situation.

 

Property multi-rights. Taxation with representation in a multi-jurisdictional democracy must establish a rigid, unmovable and singular property claim. A property that no private agent owns cannot be simultaneously owned by all jurisdictions that exist in the country. In Serbia, however, Opshtina makes a claim over village property, City, for example, over Opshtina's property and the State over all of them.

 

Problems in Policy Outcomes

 

The existing legal confusion in Serbia's government sector presents us with a dramatic plethora of political, ecological, governing and economic problems. Here is a sample:

 

Political problems. The existing system corrodes the intent of democratic vote. It makes absolutely no difference to a voter who is the elected representative when it is obvious that whoever elected will not legislate for him but will instead be legislated by the State.

 

Ecological problems. A non-private property being simultaneously owned by all jurisdictions corrodes attempts at ecological control of it. Serbia's parks, for example, are left unattended under auspices of lack of funds. Belgrade's Topchider Park, more specifically, has been reduced to a glut of mud, polluted water and inadequate parking space. Plenty of blame is pointed in all governmental directions, yet the causing agent for this ecological disaster is the simultaneous claim over that public land by all levels of government. Suppose we are to assign a singular claim upon the Opshtina, and an autonomous authority to its representatives to tax for the particular needs of it, public pressure, in the least, would force improvement of that park.

 

Governing problems. Serbia's trickle-up taxing scheme implies existence of overlapping jurisdictions and property multirights creating a paralysis in governing. Suppose a new and energetic State ecology minister that belongs to a political Party A seeks to improve parks in Serbia. State's power of jurisdictional overlap gives him an authority to mandate that, say, all city parks must have a water fountain. Yet just because he invokes the mandate the city mayor belonging to a political Party B and with his own political agenda may never implement it on grounds that it owns the park.

 

Economic problems. Just as all governmental levels in Serbia have a property claim upon a public land located inside a village it follows that the same is true of the so-called "socially owned" firms. Suppose, for example, a "socially owned" firm is to undergo privatization. Who is the buyer suppose to deal with on one hand? On the other, who are the sellers and to whom should the proceeds be allocated? In other words, Serbia's property multirights stifle economic reform.

 

Suggestions for Reform

 

Broad outlines for reform should follow democratic consistency that does not underscore cultural underpinnings of the society. One possible way is to first initiate a thorough jurisdictional reform followed by reassigning singular property claims of public ownership.

 

For example, villages of the Serbian countryside could be jurisdictionally constituted with clear and rigid jurisdictional borders. They are then to catalogue types of property that exists within their jurisdiction and ones without any disputes, private or public, to be assigned a clear and singular property claim. Questionable ownership rights that may cause disputes could be meticulously catalogued by the State in order to build an archive of dispute types. This catalogue of dispute types should help the legislators analyze dispute trends and help them in their legislative discovery.

 

In the countryside, scores of villages jurisdictionally attached to a nearby city Opshtina could be abolished. This disattachment allows a City to have its own clear lines of jurisdiction with own internal Opshtinas and relief from subsidizing villages that surround them. On the other hand, voluntary associations of villages or some other form of broader village association should be attributed legal mechanisms that preclude the cities from having a competitive advantage over them such as in spheres of utility provisions, economic development and/or political influence on the macro-level. With separation, in turn, villages gain independence to grow their economies without constraints of the city allowing them, for example, to attract capital investments on their lucrative land possessions, greater job opportunities, increased tax base, population revitalization...

 

Having gained clear and rigid jurisdictional borders, cities obtain legislative independence from the State, a clearly understood size of their tax base, a clear catalogue of assets within the city and a fiscal responsibility and political pressure to improve upon them. Gone will be the days where cities are all too eager to expand their tax base by an imperial conquest of yet another Opshtina that lays prey on their outskirts.

 

Finally, it should not be understood that presented suggestions are complete or the best. Legislative wisdom proceeds from a discovery process - first a discovery what is wrong and then towards solutions. It should be, nevertheless, very clear that current jurisdictional scheme in Serbia violates basic democratic principles whose effects are unpalatably registered on the political ambivalence of voters themselves. Invariably, the misconstrued jurisdictional scheme where cities behave as feudal imperialist who enlarges its tax base not by developing the jurisdiction it has been awarded but by legally sanctioned conquest of additional Opshtinas endlessly added to collection of tax and subsidy trophies must be changed in favor government competition and responsibility. State then, must divest its political power that has accumulated over the years towards a meaningful and results-oriented reform that will, in the process, make the democracy itself meaningful, taxation transparent, and a clear and singular claim on public property.

 

The problem then is not lack of solutions to the enumerated problems, but lack of their comprehension, gravity and ultimately political willingness and critical mass to seek solutions.