Choo Mi-ae urges Lee Jae Myung to raise local consumption tax to 40%, allocate 5% of corporate tax

【Financial News, Suwon = Chang Choong-sik】As Choo Mi-ae, Governor of Gyeonggi Province, declared an emergency fiscal situation in the province, she formally urged the government to sharply raise the local consumption tax rate from the current 25.3% to 40% at the Central-Local Cooperation Meeting chaired by President Lee Jae Myung.
The proposal was especially notable because it included a plan to allocate 5% of corporate tax, a national tax, to regional governments. It was the first time a concrete implementation plan was made public for Choo's long-standing idea of a “shared corporate tax base.”
According to Gyeonggi Province on the 26th, Choo attended the 10th Central-Local Cooperation Meeting at Cheong Wa Dae, presented a local government strategy for achieving local-led growth, and proposed tax reforms to expand local finances in practical terms.
The meeting, chaired by President Lee Jae Myung, was attended by the Prime Minister, cabinet ministers, and provincial and city governors. The agenda focused on central-local cooperation under the 9th elected local governments and measures to promote local-led growth.
In her presentation, Choo described Gyeonggi Province's current fiscal constraints as an “emergency situation” and delivered a blunt assessment of the province's finances.
Choo said, "The first reality I faced after taking office was the severe fiscal crisis in Gyeonggi Province." She added, "Although the budget appears generous at more than 40 trillion won on the surface, the actual fiscal situation has been burdened by deficits of 1 trillion to 2 trillion won for several years, leaving us with structural limits that cannot be overcome by our own efforts alone."
She continued, "As welfare demand has surged due to population growth and rapid aging, Gyeonggi Province's revenue has become overly dependent on acquisition tax, which is highly sensitive to the real estate market. This has deepened revenue instability and fiscal pressure." She emphasized that "this is not only an issue for Gyeonggi Province, but one that affects the sustainability of local autonomy in South Korea."
Accordingly, Choo presented three key proposals to overcome the local fiscal crisis.
First, she called for raising the local consumption tax rate from 25.3% to 40% in order to achieve the national policy goal of a 70:30 ratio between national and local taxes.
The idea is to shift the tax base away from acquisition tax, which is highly vulnerable to the property market, and toward a more stable consumption-based local consumption tax structure.
She also proposed creating a new system to allocate a portion of corporate tax, a national tax, to regional governments at the metropolitan level, with 5% earmarked to help cover support costs such as the development of advanced industrial complexes.
In addition, she urged the government to convert the local education tax on tobacco, which is set to expire, into a regional resource facility tax for firefighting, saying this would secure stable fire service funding, including support for firefighting personnel costs that place a heavy burden on the province's general account.

[email protected] Chang Choong-sik Reporter