Gyeonggi governor demands overhaul of local tax system, citing 'double contradiction'

Gyeonggi Province Governor Kim Dong-yeon has sharply criticized South Korea's current local finance system, describing it as having a "structural problem" and a "double contradiction." He argues that the province bears significant costs for supporting national high-tech industries and maintaining infrastructure, yet does not benefit from the resulting tax revenue increases.

In a social media post, Kim explained that Gyeonggi develops industries, builds supporting infrastructure, and covers costs for increased population and facilities, including fire services. However, he pointed out that tax revenues generated by growing companies do not return to the province. Furthermore, even the standard grants, which are supposed to increase with national tax revenue, do not benefit Gyeonggi because it is classified as an area that does not receive such grants.

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Gyeonggi Province's semiconductor companies' income, no matter how astronomically GRDP increases, Gyeonggi Province's revenue does not increase by a single penny. This is why the illusion of Gyeonggi Province being rich due to the semiconductor boom arises.

This situation leaves Gyeonggi financially strained, especially concerning public services like firefighting. The province employs about 17% of the nation's firefighters, incurring over 1 trillion won in personnel costs annually. While other regions receive grants to cover such expenses, Gyeonggi receives minimal national support, leading to increased local government debt. Adding to the burden, Gyeonggi must also contribute hundreds of billions of won to regional cooperation funds for other provinces.

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Gyeonggi Province is floundering in the double contradiction where the more efforts it makes to build industrial bases and create jobs, the more its burdens and debts increase.

Kim Dong-yeon lamented the "illusion of wealth" created by the semiconductor boom, stating that Gyeonggi's Gross Regional Domestic Product (GRDP) might increase astronomically, but the province's tax revenue remains stagnant. He described Gyeonggi as "truly an empty shell of wealth." The governor stressed that the province's efforts to build industrial bases and create jobs only increase its burdens and debts.

He called for a reform of the local finance system to align with the current realities of South Korea's industrial and demographic structures, and the evolving roles of local governments. Kim argued that financial resources should follow the burdens, and that provinces handling extensive regional affairs should receive appropriate funding. He previously declared a "fiscal emergency" for Gyeonggi, citing a 770 billion won revenue shortfall for the current year and insufficient funds for essential projects due to the previous administration's use of local bonds and various funds.

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We are not asking for anything extra. The industrial structure, population structure of South Korea, and the role that local governments must bear have all changed. However, the local finance system remains based on past standards.