Local Finance of Korea, 2022

Published on September 26, 2022
Published by Administrative Budget Analysis Division

   This year's amendment of the Local Autonomy Act in entirety laid the legal foundation for autonomous and decentralized local administration, and second stage of fiscal decentralization reorganization were completed with the goal of achieving "7:3 of state tax - local tax." The fact that there has been a “net increase” in local financial resources of about 5 trillion won through fiscal decentralization means that the innovation of decentralization of autonomy based on local finances has been concretely realized, which is much different from the past.
   Although 30 years have gone by since the reinstatement of local autonomy, advancement of decentralization of autonomy has been seen as sluggish. In particular, fiscal decentralization deserves attention as it is a prerequisite for local governments with insufficient financial capacity to take the initiative in resolving regional issues. Furthermore, this may be an important task in easing the fiscal gap between local governments, promoting balanced national development, and improving the quality of life of individual citizens.
   After recognizing the historical and policy importance of local autonomy, the National Assembly and the government have been working hard to put in place an appropriate institutional foundation. The National Assembly has carried out the full amendment of the "Local Autonomy Act" and the amendment of the "Local Transfer Act", and the government is considering the decentralization in autonomy and fiscal initiatives to implement in the future, in addition to the assessment of the fiscal decentralization performance.
   This report maintains the existing framework consisting of a total of three parts, but has updated statistical data based on the budget for 2022 and the settlement of accounts for 2021, and reflects changes in major local fiscal systems, including the progress of the 2nd Stage of Fiscal Decentralization. Additionally, the contents have been supplemented to provide more in-depth information on the latest issues, such as the current state of the financial resource sharing plan for national subsidy programs and related overseas cases, the distribution status of the Local Extinction Response Fund, and discussion on the change of local administrative districts.