This study aims to empirically analyze trends in the scales of budgets among autonomous local governments, suggest a basic road map for organizing government functions and ways to obtain resources autonomously, as well as to adjust expenditure structures.
Transferring particular functions from the central to local government requires plans to transfer resources to achieve implementation. Implementation of those functions that do not conform to theoretical standards must be a gradual transfer, while a long-term perspective should be taken for policing functions, which is typically a local function. Implementation of functions involving the environment, public housing, education, local development and health care, for example, must be unequivocally transferred to local authorities – with the exception of policy-making. The monitoring or controlling of local governments, which has traditionally been executed by the Ministry of Home Affairs, should be entrusted to local assemblies, while the Ministry must focus its efforts on adjusting local interests, as well as providing administrative knowhow/knowledge to local governments.
The goals of reinforcing local taxes should lie in minimizing resource allocation distortions and enhancing the ability of local authorities to acquire the necessary resources, as opposed to focusing on income redistribution or curbing real estate speculations. These roles are not appropriate to local governments. Regarding the issue of property tax, which is central to the local tax system, the proportion of taxes on property transactions including transfers should be lowered while that on the wealthy should increase, which would allow local governments to raise the funds needed to provide public goods and services. Candidates to be transferred include telephone tax, liquor tax, VAT and certain types of special consumption taxes.
Local non-tax revenue is locally autonomous in nature and faces relatively low levels of resistance. Local tax and non-tax revenue spiked in the 80s, and non-tax revenue showed outstanding growth in the 90s. Since 1975, non-tax revenue took up the biggest part of local revenue. In 1990, for example, non-tax revenue accounted for 48.3% of local finance, compared to just 22.9% for tax revenue. It is necessary to organize a rational fee system, continue exploring non-tax revenue sources, and promote profitable projects in order to maintain a sufficient amount of non-tax revenue.
Demand for local finance is expected to witness an upsurge, and the administrative burden on local governments will also increase as functions are transferred from the central government because of the ensuing increase and changes in local expenditure. The current local expenditure system is of an insufficient scale, inefficient and spends too little on social development. Measures have to be taken to rationalize local expenditures and reinforce local authorities’ fiscal autonomy: rationalization of local expenditure structures, gradual increase of local spending, and increasing investment in social development, especially that of social security.
Education is a typical example of public goods, and funding for education must increase. Increasing education resources requires a general up-scaling of the national budget, an increase in subsidies for local education funds, strengthening training for the unemployed, introducing special accounts for national universities, providing stronger assistance for private educational institutions, and establishing a stronger linkage between local autonomy and local education.
A new system for local development requires rational division of labor between central and local governments, as well as firm grounds for local authorities. Therefore, the administrative and fiscal functions of local governments should be expanded, and the central government should reform its administrative structure so as to assist in the effort to develop local government effectively.
지방자치제 실시에 따른 중앙 지방재정기능의 재정립(Fiscal role re-organization of central and local governments under local autonomy)
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국개발연구원; KDI 국제정책대학원|