The issue of increasing local government revenue-raising powers has emerged as a major agenda in Korea. One option is to establish a local share of the VAT as was done in Japan. This paper looks at the fiscal decentralization reforms in Japan and seeks to the implication for Korean case. It presents the Japanese fiscal decentralization reforms such as the introduction of local consumption tax(1997), the establishment of the trinity reform(2001~2006).
Japanese local consumption tax did not enhance local autonomy as local authorities are not allowed to adjust the rate of the VAT, which is collected by national authorities. Instead, greater reliance on tax for which local authorities can set the tax rate would increase their revenue powers while enhancing autonomy.