"Local governments rely excessively on funds from the central government. The ratio of national taxes to local government tax remains at the 75-to-25 level. We should first raise the grant-in-aid (non-earmarked tax) rate, which has been frozen at 19.24% for 19 years."
Yoo Jeong-bok, mayor of Incheon and chair of the Council 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 expanding local government tax, we should also work in parallel to discover new tax bases such as an environmental tax and a robot tax."
The Council of Governors is a consultative body that coordinates the views of the 17 metropolitan mayors and provincial governors nationwide and serves as an official channel of cooperation connecting the central and local governments. Yoo said, "With a sense of duty that the chair must substantively drive local decentralization and balanced development, I carried out the past year of my term."
The chair's term at the Council of Governors is typically one year. If left as is, Yoo's term, which began on Jan. 1 last year, would end on Dec. 31, 2025. However, with the June 3 local elections scheduled this year, it was decided to extend the term by six months. An official at the Council of Governors said, "According to the bylaws, if the chair's seat becomes vacant, the former chair can serve an additional six months."
Yoo pointed to two factors that hinder the development of local autonomy: the "excessive national subsidies system" and an "administrative structure centered on 'special' status." Yoo said, "A large portion of local government budgets is tied up in matching projects for national subsidies," adding, "A fundamental overhaul is needed 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, "Even North Korea used to call Pyongyang a special city or directly governed city, but now it is simply called Pyongyang City." He went on, "The term implies that some local governments are special while others are not," adding, "This sense of hierarchy is embedded precisely in the label 'special.'" The following is a Q&A with Yoo.
—Your first one-year term has wrapped up. How do you assess your performance?
"I took the chair as the new administration was launched. I focused on identifying policy tasks and getting them reflected in state tasks. I served as a bridge in consultations with the central government and the National Assembly on key local government issues, including full central funding for consumption coupons aimed at restoring people's livelihoods. I also worked hard on local diplomacy. This year marked the 33rd anniversary of Korea-China diplomatic ties and the 10th anniversary of the Korea-China free trade agreement (FTA). Using that as an opportunity, we discussed joint development and practical cooperation between Korean and Chinese local governments. We also put our heads together with Japanese local governments on economic and industrial cooperation and measures to address local extinction."
—There is criticism that a one-year term for the chair of the Council of Governors is too short.
"Personally, I think it is worth considering extending the chair's term to two years for the chair to work properly. However, given that local government heads have four-year terms, if the chair's term is two years, only two of the 17 governors and mayors would be able to serve as chair."
—What tasks should the next chair of the Council address?
"At the central-local cooperation meeting on the last month, the president and the governors discussed local fiscal conditions. A consensus was formed that fiscal decentralization is necessary for balanced national development. Now we must push forward substantive reforms for fiscal decentralization. First, national subsidy programs must be overhauled across the board. It is also necessary to create a system to consult in advance on local fiscal burdens. Along with raising the statutory rate of ordinary grants, we should also push for a phased increase in local income tax and local government consumption tax."
—To what level should the statutory grant rate be raised?
"We should raise the grant-in-aid (non-earmarked tax) rate, which has been frozen at 19.24% for 19 years. At a minimum, it needs to be increased by 5 percentage points (P) to 24.24%. Fiscal decentralization is a necessary condition for a genuine local era."
—Are there other measures for fiscal decentralization?
"Along with expanding local government tax, we should also work in parallel to discover new tax bases such as an environmental tax and a robot tax. The preliminary feasibility study and feasibility study systems also need to be improved to fit reality."
—Some argue that legislative power for local governments is necessary for full local autonomy.
"The legislative power referred to in decentralization-oriented constitutional revision means autonomous legislative power. It is the authority for local governments to make regulations such as local government ordinance and rules on their own within the scope permitted by the Constitution and laws. This is a key element of local autonomy and a means to ensure local autonomy and accountability. However, currently, administrative legislation such as enforcement decrees and enforcement rules stipulates even the details of laws, significantly restricting local governments' authority to enact local government ordinance."
—What other factors do you see as hindering local autonomy?
"Our society is accustomed to a centralized culture. There is a strong tendency to perceive 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 revision. The Constitution should make it clear that we aim for a 'decentralized state.' The subsidies system also needs to be fixed. There is no country where the central government manages local governments through subsidy programs. A large portion of local government budgets is structured as subsidy matching. The central government–centered fiscal structure is excessively strong."
—We understand you take a negative view of attaching the term "special" to designations such as special city, special self-governing province, and special-case city.
"I am basically opposed to attaching expressions like special or special-case. It can be read to mean that some regions are special and the rest are ordinary. The general public does not really know why they are special. I see it as a title that carries a culture of hierarchy."
—What do you think of upgrading to a "special city" through the consolidation of local governments?
"I am not opposed to pursuing consolidation among local governments itself to achieve specific objectives or improve the efficiency of local administration. However, attaching the label special is a problem. That is because the very act of the central government granting the "special" label to a particular local government presupposes the notion that the center is superior."