In 2010, local consumption tax system will be introduced by enactment of revised local tax law. Government bill about local consumption tax is the transfer tax system which is 5% of value added tax.
According to local tax bills, many controversial issues have been raised. Firstly, due to the introduction of local consumption tax system, the coordination problem about unfair allocation of the tax revenue between capital area and non-capital area was raised.


Secondly, even if local consumption tax system will be introduced, the choice problem was raised whether local share tax’s legal grant rate(19.24% of internal tax) will be reduced or maintained.
Thirdly, what appropriate to be tax bases of the independent local consumption tax are, on the one hand, retail, food and lodging services which indicate even distributions among regions, and on the other hand, the entrance acts at a specific place(include the using of related facilities or goods) and the food acts. Government bills defined the final private consumption index as tax base of local consumption tax.


In this report, we estimated effects on metropolitan government’s finance of local consumption tax bills which government, assemblyman Chang Che-won, Assemblyman Kang Un-Tae have proposed.


If government’s bill passed by National Assembly, we shows that the net revenue increasing effect on local consumption tax will be 0.57 billion dollars in capital areas(Seoul city, Gyoenggi-do, Incheon city) and 0.66 billion dollars in non-capital areas. On the other hand, if Assemblyman, Chang Che-won’s bill will be passed by National Assembly, we shows that the net revenue increasing effect on local consumption tax will be 0.49 billion dollars in capital areas and 1.5 billion dollars in non-capital areas. And if Assemblyman, Kang Un-Tae’s bill will be passed by National Assembly, we shows that the net revenue increasing effect on local consumption tax will be 0.39 billion dollars in capital areas and 1.64 billion dollars in non-capital areas.