Korea’s Recent Local Tax Law and Its Tasks

The local authorities still rely on the central government for their fiscal needs despite the 15-years of the exercise of the Local Autonomy system. This fiscal reliance effectively leads to the central government’s control of local governance. Securing tax revenue for local authorities is a key to addressing this issue. There can be a number of ways to that end such as an expansion in local tax, usage fee, or municipal bond, but more fundamental changes are required; local autonomous governments should be able to run the local tax system, the source for their independent self-financing, or the central government should relegate the national tax to the local tax. The FTA recently signed between Korea and the US will require enactment or revision of the relevant Korean laws, and among then the following local tax law will have to be revised. And the local tax law system will have to be re-coordinated to make it more professional to cope with the fast changing world economy, and local autonomous governments’ finance, economy and spending will have to be managed in a more sound manner.