The central government’s tax cut policy, which has been proceed since late 2008, will have a decisive effect on local government finance. To be specific, the cut of income and corporate tax will be to reduce the residence tax, which is local government’s independent source of revenue. Also, the cut of internal tax will be to reduce the local share tax, which is local government’s main tax revenue and financial transfer from central to local government.
In this report, we estimated the reduction revenue of local government due to the central government’s tax cut policy. And we reported the concrete reduction revenue of respective local government(metropolitan government).
The result of analysis shows that the estimated total reduction revenue of local government will be 25.1 billion dollars from 2008 to 2012. This means that the tax cutting will increase local tax revenue burden.
Also, we shows that the local tax revenue(residence tax, property local share tax) in capital area(Seoul city, Gyeonggi-do, Incheon city) will be more decreased than non-capital area. On the other hand, in the non-capital area’s local government, local share that in tax will be more decreased than compared to the capital area’s local government.