KRILA연구보고서

The purpose of this study is to recommend policy implications for raising local taxrevenue reflections upon regional economic activation. The current local tax systemhas a very weak relationship with regional income and consumption base. Because ofthe local tax system, local governments' effort on locating firms in order to activateregional economy is not directly related to increasing their local tax revenue.Decentralization has been a recent movement among OECD countries and the roleof local government is getting important with devolution. Especially localgovernments play an important role for activation of regional economy. Nowadaysmany local governments try to locate firms in their region as many as possible.Locating firms in general increase personal income as well as cooperation incomealong with regional economic growth. Unluckily the current local tax system has aweak relationship with personal and cooperation income bases. Locating new firmsby local governments efforts' do not account on increasing their local tax revenue.This study proposed three recommendations in order to increase local tax revenuerelating new firms in the region under the condition of taxpayers' burden unchanged.First, increasing the share of cooperation income tax thru inhabitant local tax.Second, increasing the share of personal income tax thru inhabitant local tax. Third,improving the business tax structure by marketing approach. The analysis showed thatthese recommendations alleviate the tax revenue inequality among local governments.