Local Finance of Korea, 2024

Published on Sept., 27, 2024
Published by Administrative Budget Analysis Division, Budget Analysis Department

    Since the full implementation of local autonomy in 1995, the 243 local governments in Korea have expanded their roles by adopting policies tailored to their regions' socio-economic conditions. Consequently, integrated fiscal expenditures have risen from 205.9 trillion won in 2014 to 398.4 trillion won in 2024.
    Meanwhile, the National Assembly and the government have worked diligently to establish a solid institutional foundation for fiscal decentralization to enhance local governments' autonomy. However, challenges persist, such as the low proportion of local taxes relative to national taxes and the growth of national subsidy projects. Recently, prolonged high prices and interest rates, along with slowing consumption and a sluggish construction economy, have worsened tax conditions, complicating efforts to expand central government transfer resources. In response, local governments are developing various self-rescue measures to strengthen their tax bases through strategic use of shared property, while also aiming to improve the fiscal health of local public institutions, reorganize their expenditure structures, and revitalize local industries. From a mid- to long-term perspective, changes in demographic structure are anticipated to negatively impact local finances, leading to decreased tax revenues and increased expenditures related to social welfare. Thus, there is a pressing need to consider new strategies for securing financial resources alongside efforts to enhance efficiency.
   Acknowledging this challenge, this report retains its existing three-part framework but updates statistical data based on the 2024 budget and 2023 settlement, while reflecting the operational status and key changes of the newly established system. In addition, the report provides a detailed analysis of the changes resulting from the establishment and amendment of major systems, including the local tax system reform and the introduction of the Hometown Love Donation System. It also addresses recent issues in depth, such as the current status and causes of local fiscal tax revenue errors, the status and tasks of contingent liabilities, and the promotion of integration of early childhood education and care. The appendix features a 'Local Finance Chronology' that visualizes major changes in local finances by year and organizes the administrative and fiscal status, as well as key indicators, of each local government to enhance understanding.