▲ Gyeonggi Provincial Government Building
It has been confirmed that the transition team for Gyeonggi Governor-elect Choo Mi-ae is reviewing a plan to incorporate a portion of corporate local income tax—currently under municipal jurisdiction—into provincial tax, and has even prepared specific countermeasures to address anticipated backlash from cities and counties.
According to an internal document from the transition team, the "Fair, Innovation, and Inclusion Gyeonggi Preparatory Committee," obtained by Yonhap News on June 23, the team is considering a "joint tax base" plan. Under this proposal, half of the corporate local income tax would be attributed to the province, with a portion integrated into provincial revenue and the remainder redistributed to cities and counties in the form of adjustment grants.
The transition team's plan aims to diversify provincial revenue sources, which are currently heavily reliant on acquisition tax, and to improve regional equity by absorbing and redistributing tax revenue that is currently concentrated in certain cities and counties at the provincial level.
Gyeonggi Province's severe debt situation, amounting to approximately 7 trillion won, also served as a backdrop for this reform proposal.
If implemented, it is estimated that 644 billion won—or 28.0% of the total 2.2989 trillion won in corporate local income tax collected by the 31 cities and counties in Gyeonggi Province last year—would be attributed to the provincial government.
While this is a measure to secure funding for Gyeonggi Province, local governments view it as a seizure of their own financial resources, leading to strong opposition.
Concerns are particularly deep among cities such as Yongin, Pyeongtaek, Hwaseong, and Icheon, which host large-scale semiconductor facilities like Samsung Electronics and SK Hynix and had been anticipating increased tax revenue from the semiconductor boom.
Financial officials from local governments warn that once the semiconductor boom ends, the cities and counties will face severe financial difficulties.
It has been confirmed that the transition team also diagnosed potential issues, such as backlash from cities and counties facing reduced revenue and a potential decline in corporate investment, and included countermeasures in the document.
Proposed supplementary measures include establishing regulations to temporarily compensate cities and counties for the reduction in corporate local income tax, and applying special exemptions that would allow tax revenue generated from newly attracted companies to be fully attributed to the local government for a certain period, as is currently the case.
However, opposition from local governments continues.
Yongin Mayor Lee Sang-il criticized the plan, stating, "The fact that they have even devised supplementary measures suggests that the transition team is not reviewing this lightly but is seriously intending to push it forward. Such a plan will never be accepted by the cities and counties."
In response, the transition team emphasized the need for Gyeonggi Province to transition into a grant-receiving entity during a press conference yesterday. Regarding concerns over potential conflict arising from the corporate local income tax reform, the team maintained a cautious stance, stating, "As there could be disputes with local governments, we are currently only at the review stage."
(Photo: Provided by Gyeonggi Province, Yonhap News)
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