"Local governments are excessively dependent on funds received from the central government. The ratio of national taxes to local government tax remains at 75 to 25. We must first raise the grant-in-aid (non-earmarked tax) rate, which has been frozen at 19.24% for 19 years."
Yoo Jeong-bok, the Incheon mayor who chairs the National Association of Governors, cited the "absence of fiscal decentralization" as the biggest obstacle to the development of local autonomy in a recent interview with ChosunBiz. Yoo said, "Along with improving the national tax–local government tax structure by transferring portions of national taxes to local taxes, we also need to work in parallel to identify new revenue sources such as environmental taxes and robot taxes."
The association of provincial and metropolitan governors is a consultative body that coordinates the views of the 17 metropolitan local governments nationwide and serves as an official cooperation channel linking the central and local governments. Yoo said, "I carried out my one-year term with a sense of duty that the chair must tangibly lead decentralization and balanced development."
The association chair's term is typically one year. Yoo, who took office as chair on Jan. 1 last year, was originally set to serve until Dec. 31, 2025. But with the June 3 local elections scheduled this year, the term was extended by six months. An association official said, "Under the bylaws, if the chair's seat becomes vacant, the previous chair can serve an additional six months."
Yoo pointed to two factors that hinder the development of local autonomy: the "excessive national subsidy program" and an "administrative system centered on 'special' status." Yoo said, "A significant portion of local government budgets is tied up in national subsidy matching projects," adding, "We need fundamental innovation across national subsidy programs."
He also raised issues with the "special city" system. Yoo said, "Korea is the only country in the world that calls its capital a special city," adding, "North Korea also used to call Pyongyang a special or directly governed city, but now it is simply called Pyongyang City." He continued, "It implies that some local governments are special and others are not," adding, "This hierarchical mindset is embedded in the very title 'special.'" The following is a Q&A with Yoo.
―Your one-year term has come to an end. How do you assess your performance?
"I took the chair as the new administration was launched. I focused on identifying policy tasks and ensuring they were reflected in state agendas. I served as a liaison with the central government and the National Assembly on key local government issues, including full national funding for consumption coupons to revive livelihoods. I also invested effort in local diplomacy. Last year marked the 33rd anniversary of Korea–China diplomatic relations and the 10th anniversary of the Korea–China free trade agreement (FTA). On that occasion, we discussed joint development and practical cooperation plans between Korean and Chinese local governments. With Japanese local governments, we worked together on economic and industrial cooperation and measures to address local decline."
―Some say a one-year term for the association chair is too short.
"Personally, I think it is worth considering extending the chair's term to two years for the chair to do the job properly. That said, given that governors serve four-year terms, if the chair's term were two years, only two of the 17 governors would be able to serve as chair."
―What tasks should the next chair tackle?
"At the central–local cooperation meeting last month, the president and governors discussed local fiscal conditions. There was a consensus that fiscal decentralization is necessary for balanced national development. Now we must push practical reforms for fiscal decentralization. First, we need comprehensive innovation of national subsidy programs. We also need a system to consult in advance on local fiscal burdens. Along with raising the statutory rate of the grant-in-aid (non-earmarked tax), we should also pursue a plan to gradually transfer portions of national taxes such as value-added taxes and corporate taxes to the local government consumption tax and local income tax."
―To what level should the statutory grant rate be raised?
"We must raise the grant-in-aid (non-earmarked tax) rate, which has been frozen at 19.24% for 19 years. At a minimum, it should be increased by 5 percentage points to 24.24%. Fiscal decentralization is a necessary condition for a truly local era."
―Are there other measures for fiscal decentralization?
"Alongside expanding local government tax, we should also pursue new revenue sources such as environmental taxes and robot taxes. The preliminary feasibility study and feasibility study systems also need to be improved to reflect reality."
―There are also calls that legislative power is needed for full local autonomy.
"The legislative power discussed in a decentralization-oriented constitutional amendment refers to autonomous legislative power. It is the authority for local governments to create their own regulations, such as a local government ordinance and rules, within the scope that does not violate the Constitution and laws. This is a core element of local autonomy and a means to ensure local autonomy and accountability. However, at present, regulatory orders such as enforcement decrees and enforcement rules define even the details of laws, significantly restricting local governments' autonomous legislative power."
―What other factors do you see as hindering local autonomy?
"Our society is accustomed to a centralized culture. There is a strong tendency to view the relationship between the central and local governments in hierarchical terms. We need political efforts that aim for the decentralization of political power. The starting point is constitutional amendment. The Constitution should clearly state that we aim to be a 'decentralized state.' The subsidy system must also be overhauled. No country manages local governments through central government subsidy programs. A significant portion of local government budgets is structured as subsidy matching. The central government–centered fiscal structure is overly strong."
―We understand you have a negative view of attaching the term "special," as in special city, special self-governing province, and special-case city.
"Fundamentally, I oppose attaching the terms special or special case. It can be read to mean some regions are special and the rest are ordinary. The general public does not know why they are special. I see it as a title that contains a culture of hierarchy."
―What do you think of upgrading to a "special city" through local government mergers?
"I do not oppose pursuing consolidation between local governments to achieve specific goals or to improve the efficiency of local administration. However, attaching the title special is a problem. The act of the central government conferring the title special on a particular local government itself presupposes the perception that the center is superior."