South Korean lawmakers introduce bills to reform local taxation

Legislative efforts to reform local taxation in South Korea have entered the National Assembly, following proposals by Gyeonggi Province Governor Chu Mi-ae. A group of 18 lawmakers, including Kim Tae-nyeon, has introduced six legislative amendments aimed at expanding local fiscal autonomy and securing stable revenue sources.

The proposed reforms focus on three primary pillars: increasing the local consumption tax rate from 25.3% to 40.3% of the value-added tax, establishing a new local corporate tax by transferring 5% of national corporate tax to local governments, and reallocating portions of tobacco consumption tax to fund firefighting resources. Gyeonggi Province estimates these changes could secure approximately 14.1 trillion won over four years.

The impact on other regions, such as Jeju, presents a complex fiscal outlook. While Jeju could see a significant increase in local consumption tax revenue—potentially exceeding 300 billion won annually—the shift from national taxes to local taxes may reduce the total pool of local allocation taxes. Because Jeju is guaranteed a fixed 3.0% of the national local allocation tax under special law, the reduction in the total national tax base could offset the gains from the new tax structures.