Ruling Party Fails to Reach Conclusion on 7%p Local Tax Increase Proposal

Different Positions Among Related Ministries Including Ministry of Economy and Finance and Ministry of the Interior and Safety
Difficulties in Reaching a Conclusion

Song Young-gil, leader of the Democratic Party of Korea, is attending the full meeting of the Party-Government-Cheongwadae Special Committee on Fiscal Decentralization held at the National Assembly on the 2nd, delivering opening remarks. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Jeon Jin-young] The Special Committee on Fiscal Decentralization of the Democratic Party of Korea held discussions on the proposal to increase the local consumption tax rate by 7 percentage points but failed to reach a conclusion due to differing positions among ministries.

Lee Hae-sik, a member of the special committee, told reporters after the first meeting on the morning of the 2nd, "We have not reached a complete conclusion," adding, "We will discuss various approaches such as coordinating opinions to establish a party stance or, even if not a party stance, promoting bill proposals mainly through the National Assembly’s Planning and Finance Committee and the Public Administration and Security Committee." The proposal to raise the local consumption tax rate by 7 percentage points is a national agenda of President Moon Jae-in, but since the Ministry of Economy and Finance and the Ministry of the Interior and Safety have differing positions, it is expected to be difficult to reach a conclusion. While local governments have been steadily demanding increased fiscal resources, the central government is hesitant to extend support amid economic downturn caused by COVID-19 and other factors.

However, the Democratic Party’s determination to push forward remains strong. Song Young-gil, leader of the Democratic Party of Korea, said at the meeting, "We raised the local consumption tax from 11% to 21%, and now we are discussing an additional 7 percentage point increase," adding, "It is now important to balance between the metropolitan area and local regions." The special committee also discussed measures to reduce local government basic pensions alongside the increase in local taxes. Another topic of discussion was the plan to allocate the specific place individual consumption tax imposed on entrance fees for horse racing and cycle racing venues, amounting to around 300 billion won, as local tax revenue.

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