UPDATE : 2019.7.23 TUE 15:45
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Fiscal self-reliance of local gov'ts worsens over 13 years

The financial self-reliance of South Korea's local administrations has deteriorated over the past 13 years due to increasing dependence on subsidies from central government, a report showed Tuesday.

The so-called financial independence ratio of the nation's municipalities was 52.5 percent in 2016, down from 56.3 percent in 2003, according to the report from the Korea Institute of Local Finance.

The figure measures the portion of money local governments raise on their own to finance their operations and administrative projects.

The report said the drop is probably attributable to an increase in projects subsidized by central government and a decline in self-financed ones.

The proportion of subsidized projects to total undertakings exceeded that of self-financed projects in 2013 for the first time at 41.6 percent.

"Provincial governments have increasingly resorted to subsidies from central government instead of trying to increase their own revenue by increasing flexible rates on some local taxes, resulting in a worsening financial independence ratio," said Kim Pil-heon, a researcher at the institute.

"The heads of local governments or local councils are not active in raising local taxes out of concern over tax resistance or political disadvantages."

The researcher advised local governments to jack up the local consumption tax to help expand their revenue base, estimating a 1 percent rise would increase their revenue by about 400 billion won.

The report comes against a backdrop of the Moon Jae-in administration's vow to pump up efforts to boost the financial independence of local governments as well as to cede more administrative powers to them.

Won Hwi  edt@koreapost.com

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