- Basic local governments face an “empty shell” financial structure where overall budgets expand while discretionary autonomy shrinks.
- Researchers propose raising the local consumption tax rate to 45% and creating a distinct basic local consumption tax.
- Experts emphasize that special cities and unique administrative zones require customized fiscal authorities rather than uniform decentralization policies.
Researchers and local finance experts gathered to review fiscal decentralization strategies for the 9th popular election term.
The discussions arrived as the central government prepares to restart a pan-governmental fiscal decentralization task force aimed at improving the national-to-local tax ratio to 7:3.
Park Kwan-tae, a specialist commissioner for the National Association of Mayors, [ghnews.net] stated during his presentation that current local finance suffers from diminished autonomy despite growing budgets. Financial self-reliance ratios dropped from 66.4% in 1991 to 48.6% in 2025. Meanwhile, social welfare expenditures climbed to 33.8% of local expenditures, leaving municipalities with fewer unallocated funds.
“We should raise the current 25.3% local consumption tax rate up to 45% sequentially to match a 7-to-3 national and local tax ratio, and separate a basic local consumption tax from the local consumption tax.”
Park also suggested that newly transferred revenues should be split 50-50 between metropolitan and basic governments, or weighted 40-60 in favor of basic authorities. He also recommended lifting the statutory local grant tax rate from 19.24% to the 23-24% range.
While the local consumption tax rate climbed from 11% to 25.3% of value-added tax, the average financial self-reliance ratio for cities, counties, and districts fell from 21.5% in 2014 to 18.8% in 2024. Autonomous districts saw a parallel drop from 26.4% to 21.8% over the same decade.
“We need differentiated decentralization tailored to fiscal conditions and administrative system specificities.”
| Metric | Historical / Past Data | Recent Data (2024–2025) |
|---|---|---|
| National Financial Self-Reliance Ratio | 66.4% (1991) | 48.6% (2025) |
| City/County/District Self-Reliance | 21.5% (2014) | 18.8% (2024) |
| Autonomous District Self-Reliance | 26.4% (2014) | 21.8% (2024) |
| Local Consumption Tax Rate | 11.0% (Previous baseline) | 25.3% (Current baseline) |
Panelists debated how to establish revenue-sharing standards between metropolitan and basic governments if a new basic local consumption tax is created. They also addressed mechanisms to support regions with weaker consumption bases through grant allocations. Additional discussions centered on reviewing resident tax burdens before expanding local taxation authority and establishing public disclosure frameworks for local tax expenditures.
Officials reiterated that special cities require dedicated decentralization channels to resolve ongoing imbalances between assigned administrative duties and actual fiscal power.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
