Seoul City Councilor Kim Yong-seok: "Serious Fiscal Imbalance Among Seoul Autonomous Districts... Joint Tax Share Should Be Increased by 10%p"

Property Tax Revenue Gap Between Gangnam and Gangbuk Reaches 21.9 Times... Proposal Submitted Urging Amendment of the Local Tax Basic Act

[Asia Economy Reporter Jong-il Park] Seoul Metropolitan Council member Kim Yong-seok (Democratic Party, Dobong 1) strongly urged the prompt revision of the Local Tax Basic Act to raise the shared tax portion (special city portion of property tax) from 50% to 60% to alleviate fiscal imbalance among Seoul’s autonomous districts.

Seoul has been implementing the ‘shared taxation system’ since 2008 to reduce revenue disparities among autonomous districts.

The shared taxation system taxes the property tax, which is an autonomous district tax, as a joint tax between Seoul City and the districts. Of the total property tax collected citywide, 50% is collected as the special city portion of property tax and evenly distributed to the 25 autonomous districts.

According to data requested by Council member Kim Yong-seok from Seoul City, before the introduction of the shared taxation system in 2007, property tax was 256 billion KRW in Gangnam and 17.5 billion KRW in Gangbuk, a 14.6-fold difference. After applying the shared taxation system in 2008, property tax was 157 billion KRW in Gangnam and 33.2 billion KRW in Gangbuk, reducing the gap to 4.7 times.

However, while the shared tax portion of property tax sequentially expanded from 40% in 2008, 45% in 2009, to 50% in 2010 and has maintained 50% for 10 years, the revenue gap between Gangnam and Gangbuk districts has worsened annually from 4.5 times to over 5 times in 2020, making fiscal imbalance increasingly severe.

At the time of the shared taxation introduction, Gangnam’s property tax was 256 billion KRW, but due to housing price increases, Gangnam’s tax rose by 400 billion KRW to 651.2 billion KRW, whereas Gangbuk’s increased by only about 12 billion KRW from 17.5 billion KRW to 29.8 billion KRW.

This means that although Seoul’s total property tax revenue increased by 89.4% (from 1.6347 trillion KRW in 2008 to 3.0961 trillion KRW in 2020) due to housing price rises after the shared taxation introduction, the continuous rise in real estate prices has ultimately widened the revenue gap among autonomous districts.

Accordingly, a bill to revise the Local Tax Basic Act to raise the special city portion of property tax was submitted to the National Assembly in December last year but is still under review.

Kim Yong-seok, who is likely to run for Dobong District Mayor in next year’s local elections, emphasized, “Due to rising housing prices, fiscal imbalance among Seoul’s 25 autonomous districts is worsening day by day. If the Local Tax Basic Act is revised, the shared tax portion (special city portion of property tax) will be raised by 10 percentage points, effectively supporting the financial compensation and balanced development of districts in the Gangbuk area.”

The proposal is scheduled to be discussed at the 301st regular session of the Seoul Metropolitan Council and will be forwarded to the National Assembly and the Ministry of the Interior and Safety.

-------------------------------------

◇ Proposal urging revision of the 'Local Tax Basic Act' to alleviate fiscal imbalance among Seoul Metropolitan autonomous districts

The national balanced development policy, promoted since the Participatory Government era, marks its 17th year this year. Under the Moon Jae-in administration, emphasis was again placed on balanced development and local decentralization, promoting regional balanced development projects and regional balanced New Deal policies to prevent concentration in the metropolitan area. However, efforts for fiscal balance have been limited to slight increases in local consumption tax, which is insufficient for balanced development among autonomous districts.

Among Seoul’s 25 autonomous districts, fiscal independence rates remain low at 10-20% for most districts such as Gangseo (21.9%), Gwanak (19.7%), Jungnang (18.2%), Gangbuk (17.2%), and Nowon (15.9%), except for a few with strong fiscal capacity like Seocho (58.2%), Jung-gu (55.3%), and Gangnam (54.9%). According to the ‘2021 Easy-to-Understand Seoul City Budget,’ the fulfillment rate of standard financial demand is highest in Gangnam-gu and Seocho-gu at 204.3% and 99.1%, respectively, while Gangbuk-gu and Seongbuk-gu are relatively low at 57.0% and 51.5%.

Moreover, fiscal disparities affect education: the 2021 budget for educational support by autonomous districts shows Gangnam-gu allocating 29.2 billion KRW, while Gangbuk-gu allocates 7.2 billion KRW, a difference of more than four times.

Such fiscal imbalance among autonomous districts not only undermines the autonomy of local governments but also impairs the basic functions of districts to meet residents’ fundamental needs, making it essential to maintain an appropriate level of fiscal balance for the equitable welfare of all Seoul citizens.

Seoul has been implementing the shared taxation system since 2008 to reduce revenue disparities among autonomous districts. This system taxes property tax as a joint tax between Seoul City and the districts, collecting 50% as the special city portion and distributing it evenly to the 25 districts.

Before the shared taxation system was introduced in 2007, property tax was 256 billion KRW in Gangnam and 17.5 billion KRW in Gangbuk, a 14.6-fold difference. After applying the system in 2008, property tax was 157 billion KRW in Gangnam and 33.2 billion KRW in Gangbuk, reducing the gap to 4.7 times.

After the introduction of shared taxation, Seoul’s total property tax revenue increased by 89.4% (from 1.6347 trillion KRW in 2008 to 3.0961 trillion KRW in 2020) due to housing price rises, but continuous real estate price increases have further widened the revenue gap among districts.

The shared tax portion of property tax increased sequentially from 40% in 2008, 45% in 2009, to 50% in 2010, maintaining 50% for 10 years. By 2020, revenue was 651.2 billion KRW in Gangnam and 29.8 billion KRW in Gangbuk, a 21.8-fold gap. Even after applying the shared tax portion, the difference remains over five times (Gangnam 387 billion KRW, Gangbuk 76.3 billion KRW), worsening fiscal imbalance.

Therefore, raising the special city portion of property tax by 10 percentage points within the shared tax portion is necessary to resolve revenue disparities among districts and expand support for financially disadvantaged districts to promote balanced development.

Accordingly, the Seoul Metropolitan Council strongly urges the prompt revision of the Local Tax Basic Act to raise the special city portion of property tax calculated under the Local Tax Act from 50% to 60% to alleviate fiscal imbalance among autonomous districts.

This content was produced with the assistance of AI translation services.