This study forecasts the volume of local government expenditure, which that will increase as local government systems begin, and suggests methods to increase funding.
In the future, regional development is expected to be implemented in such a way as to meet local demands, and functions now served by the central government are predicted to be transferred to local governments. As a result, financial demands will increase significantly, and sufficient funding will be required. To this end, there is a need for an institutional measure to manage the predicted funding requirements. Fund supplies should be based on the principles of benefit, vertical balance, horizontal balance, and the balance —basic concepts of the local government system. This study suggests the following methods of supplying funding:
First, local taxes can be increased by strengthening taxation administration. Given the financial conditions in Korea, it is more reasonable to increase tax revenues by reducing tax evasion rather than increasing tax rate or exploring a new source of taxation. To reduce tax evasion, reform is necessary in divisions such as the taxation administration system and local government staff.
Second, local tax systems should be reformed. Funds can be supplied by increasing the use of the flexible tax rates, tax reform focusing on imposing taxes on property, increasing the use of imposing taxes on consumption and income, and reducing tax items. In particular, composite land taxes, introduced to discourage speculation, should be modernized, as real-name financial system and real-name real estate system have already been implemented.
Third, the transfer of public finances should be increased, which is necessary for vertical balance between the central and local governments, to resolve disparities between expenditure and income within local governments. The local government finance adjustment program also needs to be improved to encourage local governments to make voluntary efforts to expand their financial resources.
Fourth, revenues other than local tax should be increased. The introduction of the local government system enables local governments to conduct business and profits generated from the business can used as local government funding. Also, a local government whose finances are deficient can consider using local tax.
중 장기 지방재정규모의 전망과 재원조달 방안(Mid- and long-term prospect for local governments' finance and ways to supply funds)
|Series Title; No||정책연구시리즈 / 96-02|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||KDI; KDI School|