Ruling Party and Government to Address Concerns That Future Response Fund Could Reduce Local Grant Tax

[Financial News] The ruling party and government are working on measures to address concerns that the establishment of the Future Response Fund could reduce the Local Grant Tax. Local governments have raised concerns that the Local Grant Tax could fall short of initial expectations as part of the increase in tax revenue is set aside for the fund.
The Democratic Party of Korea and the government held a party-government consultation at the National Assembly of the Republic of Korea on the 29th to discuss the fund's operation and measures to strengthen local government finances with provincial governors and metropolitan city mayors.
Local governments are concerned that the creation of the Future Response Fund could reduce the growth of the Local Grant Tax. The Local Grant Tax is linked to national tax revenue, but part of any increase in tax revenue will be allocated to the fund, meaning the amount returned to local governments may fall short of initial expectations.
Yun Ho-jung, Minister of the Interior and Safety, said, "The system is designed so that the Local Grant Tax will increase in 2027 compared with this year, but there is some difference from the level local governments expect." He added, "Local governments have deep concerns that the size of the Local Grant Tax will be smaller than projected because of the design of the Future Response Fund."
Kim Min-seok, leader of the Democratic Party of Korea, said, "We must also listen to concerns that the creation of the fund should not result in insufficient local tax revenue or reduced autonomy in local government finances." He added, "We will fully discuss and reflect local concerns and proposals through consultations among the party, the government and local governments."
The government plans to establish a local account within the Future Response Fund and expand regional investment. Park Hong-keun, Minister of Planning and Budget, said, "Support for local governments will never be reduced." He added, "Even during the National Assembly's deliberations, we will listen to the voices of local governments above all else."
Local governments also called for the Local Grant Tax rate itself to be revised. Park Chan-dae, mayor of Incheon, urged, "As tax revenue recovers, local governments should also receive their share of that recovery." He added, "The Local Grant Tax rate has remained unchanged for 20 years since 2006. Please discuss adjusting the rate as well, in line with the direction of fiscal decentralization."
[email protected] Song Ji-won Reporter