Gyeonggi-do's Proposal to Raise Local Consumption Tax Rate from 21% to 25.3%... Positive Signal for Fiscal Expansion

[Asia Economy (Suwon) = Reporter Lee Young-gyu] Gyeonggi Province's local consumption tax rate, which has been continuously requested, has been raised from 21% to 25.3%, increasing the province's local finances without additional tax burden on residents.

According to Gyeonggi Province on the 11th, the Local Tax Act amendment and the Value-Added Tax Act amendment, which raise the local consumption tax rate from the existing 21% to 25.3% by 2023 (23.7% in 2022), a 4.3 percentage point increase, passed the National Assembly in December last year and came into effect on January 1 this year.

The local consumption tax refers to the portion of the national value-added tax converted into local tax.

The Ministry of the Interior and Safety expects that with the amendment, 4.1 trillion won annually will be transferred from the national government to local governments, and the ratio of national tax to local tax will improve from 73.7 to 26.3 in 2020 to 72.6 to 27.4 in 2023.

Previously, the province continuously requested the central government and members of the National Assembly through policy councils and national audits last year to raise the local consumption tax rate, which converts part of the national value-added tax into local tax, to enhance local fiscal independence.

Along with this, the province is also promoting a plan to convert the individual consumption tax imposed when entering golf courses and racetracks into local tax as one of the measures to transfer national tax to local tax.

Additionally, the province is actively working to expand local finances by proposing the introduction of a leisure tax on Sports Toto (sports promotion lottery tickets) and imposing acquisition tax on artworks and other items.

A provincial official emphasized, "To alleviate the financial pressure on local governments caused by increased welfare demands due to COVID-19 and other factors, it is urgently necessary to expand local tax sources," adding, "We will continue to make efforts to expand independent revenue sources in 2022 as well."

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