Problems and Improvement Directions of Local Taxes in
Basic Local Governments: Focusing on Revenue Imbalance,
Collection Efficiency, and Strengthening Financial
Independence Yangpyeong-gun Real Estate Research Institute
2025_01Hong Young-ho
Abstract
This study aims to identify the problems related to local taxes in local
governments and suggest ways to improve them. Local governments
utilize local taxes as their main source of revenue, but face problems
such as revenue imbalance among localities, collection inefficiency,
heavy tax burden, and tax rate disparity. These issues can hinder local
economic development and result in unfair tax burdens for residents.
This study proposes various improvements to address these issues,
including diversifying tax revenues, improving the collection system,
rationalizing the distribution of tax burdens, and strengthening the
equity of local taxes. also concludes that local governments should
strengthen their financial independence to reduce their dependence on
local taxes and promote fairer and more efficient fiscal management.
Keyword
municipalities, local taxes, revenue imbalance, collection efficiency,
overburdened tax burden, tax rate imbalance, fiscal independence, ways
forward2 --
1. Introduction
Local taxes one of the main sources of funding for municipalities,
playing a key role in local public service delivery and fiscal independence.
However, many municipalities face number of challenges, including
imbalances in local tax revenues, inefficiencies in collection, and heavy
tax burdens. These issues can play a major role in widening economic
disparities between regions and contribute to differences in the quality of
public services. This report aims to highlight the problems of local
taxation in basic local governments and suggest ways to improve them.
2. Analyze local tax issues
Local are subject to greater volatility compared to central government,
which can lead disparities revenues between regions, especially
depending on the economic base of the regionthese can be in that are
more to economic shocks. García et al1) highlighted this volatility by
studying the impact of exogenous factors, such as natural disasters, on
local tax revenues.
Arintoko and Bawono2) address the issue of declining tax revenues in the
midst of economic recession by proposing strategies optimize tax
revenues within local governments. This suggests that local governments
need a more strategic approach to respond to economic shocks.
Inefficiencies in the local tax collection process can lead to high
delinquency rates. Martín et al3) studied the efficiency of municipal tax
administration in Spain and suggested the need to improve the efficiency
of municipal tax collection.
Inconsistencies in local tax policy can lead to taxpayer confusion and
reduce the equity of the tax burden. Research by Allers and Rienks4)
analyzed the impact of voters on local tax policy, highlighting the
importance of voter engagement to increase policy consistency and
transparency.
Tax revenues concentrated in certain regions can exacerbate regional 3 --
development disparities. Ly and Paty5) found that the franc
1) García, J. A., Dall'erba, S., & Ridley, W. C. (2022). The impact and externalities
of natural disasters on local tax revenue in Colombia. Regional Studies, 57,
857-867.
2) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues for
local government within the framework of regional automation. Public Policy.
and Administration.
3) Martín, I. B., Henarejos, L. O., & Polo, C. (2021). Local tax management in
Spain: A study of the conditional efficiency of provincial tax agencies. SocioEconomic
Planning Sciences, , 101057.
4) Allers, M., & Rienks, H. (2024). Voters' influence on local tax policy. European
Journal of Political Economy.
5) Ly, T., & Paty, S. (2020). Local taxation and tax base mobility: Evidence from
France. Regional Science and Urban Economics, 82, 103430.4 --
s case to study how tax revenue-based mobility affects economic
disparities between regions.
Increased reliance on local taxes can reduce a local government's
financial independence. This can make it difficult for local governments
to operate independently in the long run. Tang et al6) studied the
relationship between local government debt and tax collection, raising
the for a approach to improve local governments' fiscal independence.
2.1. Tax revenue imbalance
Differences in the economic base of regions one of the main causes of tax
revenue imbalances: certain regions have strong economic activity or are
resource-rich and therefore generate a lot of tax revenue, while other
regions have weak economic activity and therefore struggle to secure tax
revenue. This is illustrated a study in France that shows how tax revenue
mobility between regions affects economic imbalances.7)
Tax revenue imbalances make it difficult for local governments to
efficiently allocate the resources they need to provide public services.
This can lead to an uneven distribution of resources between regions,
resulting in areas of need not receiving sufficient financial support.
Differences in tax revenues between regions can lead to political
discontent, which can lead to greater political instability. Lack of
consistency in local tax policy can exacerbate these problems, and
research analyzing voter influence over tax policy highlights the need for
such consistency.8)
Improving local government fiscal policies is necessary to address the
issue of revenue imbalances. A strategic approach is needed to increase
the efficiency of local tax collection and strengthen the fiscal
independence of municipalities. For example, some studies suggest
strategies increase the efficiency of local tax collection and optimize tax
revenues within local governments.9)
A policy response is needed to increase the fiscal independence of local
governments. This should be done by reducing their reliance on local 5 --
taxes and easing their dependence on financial support from the central
government. Studies analyzing the relationship between local
government debt and tax collections raise the need for policy approaches
to improve this fiscal independence.10)
6) Tang, W., Zhao, X., Zhai, S., & Cao, L. (2023). Local government debt and
corporate tax burden: A perspective based on the trade-off of government tax
collection and management. PLOS ONE, 18.
7) Ly, T., & Paty, S. (2020). Local taxation and tax base mobility: Evidence from
France. Regional Science and Urban Economics, 82, 103430.
8) Allers, M., & Rienks, H. (2024). Voters' influence on local tax policy. European
Journal of Political Economy.
9) Martín, I. B., Henarejos, L. O., & Polo, C. (2021). Local tax management in
Spain: A study of the conditional efficiency of provincial tax agencies. SocioEconomic
Planning Sciences, , 101057.6 --
Local tax revenues for municipalities can be unbalanced depending on
the characteristics of the local economy. Economically developed areas
can generate relatively large amounts of tax revenue, while areas with
less economic vitality struggle to generate tax revenue. For example,
property taxes account for a large share of local tax revenues in real
estate-rich areas, while rural areas, etc. have less local tax revenue.
This leads disparities in service levels between regions, with less fiscally
independent regions struggling to provide the necessary public services to
their residents, which can further widen economic disparities.
2.2. Lack of efficiency in local tax collection
Increasing delinquency rates one of the main causes of inefficiency in
local tax collection, which stems from the lack of a systematic
delinquency management a of response to delinquent taxpayers. There
is a need to address these issues through a systematic approach, and local
governments to develop more proactive arrears management strategies.
Martín et al. emphasized the need for such an approach by studying the
efficiency of local tax administration in Spain.11)
Taxpayers may not have easy access to tax information or may be
reluctant to pay taxes due to the complexity of the tax system. Beeri et al.
study the impact of mutual trust with taxpayers on tax collection rates,
suggesting that local governments should build trust with taxpayers and
increase information provision.12)
Many local governments have outdated collection systems and inefficient
administrative processes. Cheng et al. study the impact of the
introduction of digital tax administration on local government debt and
suggest the need to improve collection systems through digitization and
automation.13)
Unclear tax policies can confuse taxpayers and make them reluctant to
pay taxes. It's important to have consistent tax policies and provide clear
guidance, which can increase taxpayer confidence and encourage tax
payments.7 --
Increasing the efficiency of local tax collection requires building a
systematic management system and running taxpayer education
programs. Arintoko and Bawono propose a strategy for optimizing tax
revenue within local governments, which is based on the use of g
10) Tang, W., Zhao, X., Zhai, S., & Cao, L. (2023). Local government debt and
corporate tax burden: A perspective based on the trade-off of government tax
collection and management. PLOS ONE, 18.
11) Martín, I. B., Henarejos, L. O., & Polo, C. (2021). Local tax management in
Spain: A study of the conditional efficiency of provincial tax agencies. SocioEconomic
Planning Sciences, , 101057.
12) Beeri, I., Zaidan, A., & Zeedan, R. (2021). Willingness to pay taxes through
mutual trust: The effect of fairness, governability, tax-enforcement and
outsourcing on local tax collection rates. Governance.
13) Cheng, Q., Chen, B., & Luo, J. (2024). The impact of digital tax
administration on local government debt: based on the revision of the Tax
Collection and Administration Law. Finance Research Letters.8 --
Emphasize the need to develop efficient collection strategies tailored to
station characteristics.14)
The process of levying and collecting local taxes is often inefficient or
lacking in systematic management. For example, the basis for levying
taxes may be unclear, tax evasion may occur, and administrative errors in
revenue collection lead to difficulties in recovering financial resources.
When local tax collection rates decline, municipalities run out of
financial resources and struggle to provide essential public services.
2.3. Heavy tax burden
If local tax policies don't reflect the true capacity of the local economy,
certain classes or neighborhoods may be subject to an unreasonably high
tax burden. This can be caused by irregularities in the tax structure,
which can lead to an excessive concentration of taxes on certain classes.
Research shows that trust with taxpayers has a significant impact on tax
collection rates,15) and it is necessary to increase the effectiveness of
policies.
When local governments become overly reliant on tax revenues, the tax
burden can increase during economic downturns or external shocks.
This can have a particularly severe impact on low-income households
and can increase social inequality. Studies the correlation between local
government debt and tax collection show that a high reliance on tax
revenues can make them vulnerable to economic downturns.16)
When certain industries or income groups are overtaxed, an imbalance in
the tax burden occurs. Studies have analyzed how the distribution of the
tax burden affects the distribution of income, showing that
overburdening certain classes can increase economic hardship.17)
Inefficiencies in the local tax collection process can lead to taxpayer
dissatisfaction and make them feel more tax burdened. Improvements to
the collection system are needed, which can also contribute to building
trust with taxpayers.18)9 --
To alleviate the heavy tax burden, tax policies need to be revisited and
revamped to make them fairer
14) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues
for local government within the framework of regional automation. Public
Policy.
and Administration.
15) Beeri, I., Zaidan, A., & Zeedan, R. (2021). Willingness to pay taxes through
mutual trust: The effect of fairness, governability, tax-enforcement and
outsourcing on local tax collection rates. Governance.
16) Tang, W., Zhao, X., Zhai, S., & Cao, L. (2023). Local government debt and
corporate tax burden: A perspective based on the trade-off of government tax
collection and management. PLOS ONE, 18.
17) Benassi, C., & Randon, E. (2020). The distribution of the tax burden and
the income distribution: theory and empirical evidence. Economia Politica,
38, 1087-1108.
18) Martín, I. B., Henarejos, L. O., & Polo, C. (2021). Local tax management in
Spain: A study of the conditional efficiency of provincial tax agencies. SocioEconomic
Planning Sciences, , 101057.10 --
is needed. Local governments should explore a range of fiscal alternatives
to ease the tax burden, which can reduce the burden on taxpayers.
Research suggests that increased life security through public welfare can
have a positive impact on perceptions of tax burden.19)
It often results in a disproportionate tax burden on residents. Higher
local taxes can increase residents' resistance to taxation and cause
economic strain.
An excessive tax burden can adversely affect the living standards of local
residents, which can negatively impact economic growth. In addition, tax
resistance can result in a decrease in tax revenue.
2.4. Disproportionate rates of local taxes
Different regions have different levels of economic development, so tax
rates are applied unevenly. Wealthier regions can afford to pay higher tax
rates, while economically challenged regions forced to pay lower tax
rates. This can negatively impact the fiscal independence of certain
regions. Research on the impact of local tax non-taxation and reduction
on local economic growth shows that these differences actually have a
differential impact on gross regional product (GRDP).20)
Political decisions by local governments can have a significant impact on
tax rate setting. Political popularity or pressure from particular interest
groups can result in unfairly adjusted tax rates, which can cause
dissatisfaction among voters. Research on the influence of voters on local
tax policy highlights the importance of these political factors.21)
A complex tax system and multiple tax rate settings can be confusing for
taxpayers. This leads to tax avoidance, increased arrears, and a negative
impact on local governments' revenue collection. A study of local tax
administration in Spain emphasizes the need to reduce this complexity to
increase collection efficiency.22)
Unbalanced tax rates can undermine social equity, especially when the
tax burden falls disproportionately on low-income individuals or certain
groups, which can increase social discontent and undermine community
stability. Research on the relationship between tax burden and income 11 --
distribution points the importance of this equity issue.23)
19) Jongmin, Yang. (2021). A study on the structure of tax burden perception
in Korean society: Focusing on the effects of income, assets, and liabilities.
Economy and Society, (132), 168-207.
20) Kim, Jin (2021). Local tax exemption/reduction and local economic growth:
Focusing on the effects of basic and metropolitan local tax
exemption/reduction types. Journal of the Korean Policy Studies Association,
30(3), 39-75.
21) Allers, M., & Rienks, H. (2024). Voters' influence on local tax policy.
European Journal of Political Economy.
22) Martín, I. B., Henarejos, L. O., & Polo, C. (2021). Local tax management in
Spain: A study of the conditional efficiency of provincial tax agencies. SocioEconomic
Planning Sciences, , 101057.
23) Benassi, C., & Randon, E. (2020). The distribution of the tax burden and
the income distribution: theory and empirical evidence. Economia Politica,
38, 1087-1108.12 --
Policy efforts are needed to increase the fairness and transparency of tax
rates. Setting tax rates that take into account local characteristics and
simplifying the tax system can contribute to building trust between
taxpayers and local governments. the differential effects of local tax
exemptions and reductions on local economies, careful policy design is
needed.24)
Different municipalities have different tax rates. This can lead to
differences in tax burden across regions, even for the same tax category,
which can lead to equity issues.
Differences in tax rates can exacerbate economic disparities between
regions, and residents may feel an unfair tax burden.
3. How to improve local taxes
To address the disparity in tax rates between regions, there is a need to
rationalize tax rates and promote uniformity. This can promote economic
equity, particularly by designing tax rates to take into account differences
in the regional economic base. Research has shown that it is important to
adjust tax rates to take into account the impact of the tax burden on
income distribution.25)
Digitizing your local tax collection system is an effective way to increase
efficiency and reduce delinquency rates. Digital platforms can engage
taxpayers by providing them with information and simplifying the
process of paying taxes. Research the impact of the introduction of
digital tax administration on local government debt shows that
digitization can significantly improve the efficiency of local tax
collection.26)
Increasing the transparency of tax policies and enhancing
communication with taxpayers can help build trust and increase
taxpayers' willingness to pay taxes by revealing how taxes are used and
how policy decisions are made. Research shows that fairness and
transparency have a positive impact on tax collection rates.27)13 --
Social equity should considered when designing tax structures and
policies to reduce the tax burden on low-income and vulnerable
populations through tax breaks or supportive policies. This is an
important aspect of the
24) Kim, Jin (2021). Local tax exemption/reduction and local economic growth:
Focusing on the effects of basic and metropolitan local tax
exemption/reduction types. Journal of the Korean Policy Studies Association,
30(3), 39-75.
25) Benassi, C., & Randon, E. (2020). The distribution of the tax burden and
the income distribution: theory and empirical evidence. Economia Politica,
38, 1087-1108.
26) Cheng, Q., Chen, B., & Luo, J. (2024). The impact of digital tax
administration on local government debt: based on the revision of the Tax
Collection and Administration Law. Finance Research Letters.
27) Beeri, I., Zaidan, A., & Zeedan, R. (2021). Willingness to pay taxes through
mutual trust: The effect of fairness, governability, tax-enforcement and
outsourcing on local tax collection rates. Governance.14 --
the economy. Studies shown how equity in tax policy affects income
distribution.28)
Diversified revenue sources should be explored to increase local
governments' fiscal independence, which should move towards building
sustainable fiscal structures that allow local governments to raise
revenues on their own, with support from the central government.
Research proposing strategies to optimize tax revenues within local
governments supports this direction.29)
3.1. Diversify your local tax revenue
To diversify local tax revenues, it is important to identify new sources of
revenue that reflect local characteristics. Taxes targeted at specific
consumption behaviors can be introduced through the introduction of
selective excise taxes, which compensate for the shortcomings of local
excise taxes.30) You can also consider introducing taxes that leverage local
assets or resources (e.g., tourism taxes, environmental taxes).
Local governments can diversify their revenue sources by increasing nontax
revenues. Research shows that administrative factors, such as the
existence of a dedicated revenue organization, have a positive impact on
increasing non-tax revenues.) This can be through increasing revenues
such as and fees.
Digitizing local tax collection systems is effective in improving collection
efficiency and reducing arrears. Digital tax administration also has a
positive impact on local government debt management, which can
contribute to diversifying tax revenues.32)
Cooperation between neighboring municipalities is an important element
of tax revenue diversification. They can work together to revitalize their
local economies through joint projects or infrastructure development,
and share the increased tax revenues that result. Such cooperation can be
particularly effective for large-scale projects.
Providing tax breaks and incentives for specific industries can stimulate
local economic activity and increase tax revenues in the long run. This
can have a positive impact on diversifying the local economic base.33)15 --
28) Benassi, C., & Randon, E. (2020). The distribution of the tax burden and
the income distribution: theory and empirical evidence. Economia Politica,
38, 1087-1108.
29) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues
for local government within the framework of regional automation. Public
Policy.
and Administration.
30) Yoon, Tae-Sub. (2022). A study on the introduction of selective
consumption tax as a means of local fiscal expansion: focusing on the
possible role of selective consumption tax as a real local consumption tax.
National Policy Studies, 36(2), 39-65.
31) Kim, Sang-Soo, & Tak, Hyun-Woo (2020). Analyzing the influencing factors
on local governments' efforts to secure non-tax revenues: A review of
demographic, political, and fiscal aspects. Journal of Finance, 13(3), 95-129.
32) Cheng, Q., Chen, B., & Luo, J. (2024). The impact of digital tax
administration on local government debt: based on the revision of the Tax
Collection and Administration Law. Finance Research Letters.
33) DiTommaso, A., & Greenbaum, R. T. (2021). An Examination of the
Relationship Between Local Tax Incentives and Diversification of
the Local Economic Base. Economic16 --
Basic local governments rely on real estate and income taxes. They need
to diversify their tax revenues to address the imbalance.
We need to find new taxes that fit local characteristics and develop
various tax sources, such as tourism taxes and environmental taxes, to
expand the base of tax revenue.
3.2. Improving local tax collection
The introduction of electronic tax filing and payment systems is an
important way to increase the efficiency of local tax collection. Studies
have shown that digital tax administration can also have a positive impact
on addressing local government debt problems.34) These systems can
simultaneously increase the transparency and efficiency of tax
administration.
Disclosing how tax dollars are spent is an important means of building
citizen trust. Research shows that mutual trust between citizens and
governments a positive impact on willingness to pay taxes.)
Transparency is a key factor in gaining
Regular tax surveys and data analytics techniques are necessary to
uncover missing revenue sources. Tax surveys are essential to expanding
local governments' tax base[2], and data analytics can help uncover new
sources of revenue.
Tax education programs aimed at citizens are important for raising tax
awareness. Education can lead to a better understanding of the
importance and uses of taxes, which can ultimately lead to more
voluntary tax payments.
Developing a tax system tailored to local characteristics contributes to
greater equity in income distribution. Studies have shown that locally
tailored taxes can contribute to optimizing tax revenues for local
governments.36)
Increased cooperation between central and local governments essential
to expanding the tax base, especially in regions with diverse economic 17 --
structures.37)
Development Quarterly, 35, 108-124.
34) Cheng, Q., Chen, B., & Luo, J. (2024). The impact of digital tax
administration on local government debt: based on the revision of the Tax
Collection and Administration Law. Finance Research Letters.
35) Beeri, I., Zaidan, A., & Zeedan, R. (2021). Willingness to pay taxes through
mutual trust: The effect of fairness, governability, tax-enforcement and
outsourcing on local tax collection rates. Governance.
36) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues
for local government within the framework of regional automation. Public
Policy.
and Administration.
37) Allers, M., & Rienks, H. (2024). Voters' influence on local tax policy.
European Journal of Political Economy.18 --
Increasing efficiency of local tax collection processes and ensuring that
collections are fair can help transparency in revenue collection and
prevent illegal tax avoidance.
An e-tax system can be implemented to improve the efficiency of tax
collection and increase the convenience of paying local taxes, while
extending the tax payment deadline and introducing installment
payment systems to facilitate revenue collection.
3.3. Reasonable distribution of tax burden
Progressive income taxes are effective in reducing income inequality by
charging higher tax rates to higher earners. Research shows that
progressive taxes can increase tax equity and strengthen willingness to
pay taxes.38) It's one way to increase social fairness and distribute the tax
burden more equitably.
Imbalances in the tax burden can be addressed through tax breaks and
government assistance programs targeted at low-income earners. These
policies strengthen the social safety net and increase social stability by
providing tax relief for the economically vulnerable.
Reducing or eliminating VAT on basic necessities can reduce the tax
burden on low-income people. This is particularly important given that
consumption taxes can be relatively regressive39) and can provide real
benefits to consumers, helping to reduce the cost of living.
Increasing transparency about where taxes are spent and encouraging
citizens to participate in the tax policy-making process can increase
acceptance of the tax burden. Research has shown that transparency and
citizen participation can be important factors in strengthening
motivation to pay taxes.40)
Policies are needed to address economic imbalances by balancing tax
collection and support by region. This help to reduce tax revenue
imbalances among regions and promote balanced regional
development.41)19 --
Tax burdens be reasonably distributed according to the income and
wealth levels of local residents. Reducing excessive tax burdens can ease
the economic burden on residents.
38) Doerrenberg, P., & Peichl, A. (2013). Progressive taxation and tax morale.
Public Choice, 155, 293-316.
39) Nichols, D. R., & Wempe, W. F. (2010). Regressive Tax Rates and the
Unethical Taxation of Salaried Income. Journal of Business Ethics, 91, 553-566.
40) Beeri, I., Zaidan, A., & Zeedan, R. (2021). Willingness to pay taxes through
mutual trust: The effect of fairness, governability, tax-enforcement and
outsourcing on local tax collection rates. Governance.
41) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues
for local government within the framework of regional automation. Public
Policy.
and Administration.20 --
You can address the imbalance in the tax burden by increasing tax breaks
or tax support for low-income people. This should ensure that lowincome
residents do not face unnecessary financial burdens.
3.4. Increase local tax equity
The central government formulate policies to more fairly distribute tax
revenues among local governments. This can reduce income disparities
by redistributing tax revenues in a way that takes into account the
characteristics and needs of local economies, and help all regions achieve
balanced development. Research has shown that reducing tax revenue
imbalances between regions can contribute to greater local tax equity.42)
Transparent tax policies and citizen engagement play an important role
in promoting equity in tax policy. Allowing citizens to see how their taxes
are used and to participate in the policy-making process can increase
trust in taxes and contribute to greater willingness to pay taxes.43)
Tax breaks and financial assistance to economically disadvantaged
neighborhoods can be expanded to reduce tax burdens and increase
equity. In addition to direct assistance to low-income populations, this
can contribute to broadening the tax base over the long term by
promoting economic development in the community.44)
It's important to educate citizens about local taxes so that they
understand the importance of their taxes and how they are used. This can
increase residents' awareness of paying taxes and increase their interest
in local tax equity. Research shows that tax education a positive impact
on willingness to pay taxes.45)
Periodic tax adjustments should be made to respond appropriately to
changes in the local economy. This contributes to maintaining tax equity
by developing tax policies that reflect the characteristics of the local
economy.46)
Reduce tax rate differences between municipalities promote tax equity.
The national level should set certain standards and encourage
municipalities to set tax rates based on them.21 --
Countries set standards for setting tax rates, and municipalities should
follow them to minimize differences in tax rates between regions. This
will help to strengthen tax equity.
42) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues
for local government within the framework of regional automation. Public
Policy.
and Administration.
43) Beeri, I., Zaidan, A., & Zeedan, R. (2021). Willingness to pay taxes through
mutual trust: The effect of fairness, governability, tax-enforcement and
outsourcing on local tax collection rates. Governance.
44) Bachas, P., Jensen, A., & Gadenne, L. (2024). Tax Equity in Low- and
Middle-Income Countries. Journal of Economic Perspectives.
45) Castañeda, V. (2019). Tax Equity and its Association with Fiscal Morale.
International Public Management Journal, 24, 710-735.
46) Ly, T., & Paty, S. (2020). Local taxation and tax base mobility: Evidence
from France. Regional Science and Urban Economics, 82, 103430.22 --
3.5. Build financial independence
Local governments diversify their revenue base to reduce reliance on a
particular tax base, while seeking the optimal mix of revenue sources
that fits the characteristics of the local economy. This will increase
responsiveness to economic volatility and enable stable fiscal operations.
Studies have shown that local tax optimization can contribute to greater
revenue stability.47)
Fiscal decentralization gives local governments greater fiscal autonomy,
them to create and implement policies that are tailored to local
conditions. This allows them to respond more efficiently to the needs of
local residents and can contribute to the revitalization of local economies.
Studies have shown that fiscal decentralization has a positive impact on
increasing the productive efficiency of governments and strengthening
their fiscal independence.48)
Local governments can increase their fiscal independence by expanding
non-tax revenue sources, for example in the form of utility fees. Research
shows that expanding non-tax revenues can have a positive impact on a
local government's fiscal health.49)
Digital finance and innovative technologies can be leveraged to increase
the efficiency of tax collection and fiscal management. This can
contribute to increasing the operational efficiency of local governments
along with expanding tax revenues. studies from China show that the
development of digital finance has played a positive role in local
government fiscal revenues.50)
You can build community trust by residents in managing their finances
and increasing transparency. This can strengthen residents' willingness
to pay taxes and contribute to greater financial independence. Research
shows that citizen engagement is an important factor in increasing tax
collection rates.51)
Municipalities should be encouraged to become financially independent.
Increasing their financial independence will reduce their dependence on
local taxes.23 --
The municipality can raise funds through the issuance of municipal bonds,
or by partnering with companies that fit their local characteristics.
47) Arintoko, A., & Bawono, I. R. (2021). the optimization of local tax revenues
for local government within the framework of regional automation. Public
Policy.
and Administration.
48) Alonso, J., & Andrews, R. (2018). Fiscal decentralization and local
government efficiency: Does relative deprivation matter? Environment and
Planning C: Politics and Space, 37, 360-381.
49) Kim, J., & Park, N. (2020). Assessing the Effects of Financial Sources on
the Fiscal Soundness of Local Government: With a Focus on Special
Grants and Non-Tax Revenue. Lex Localis - Journal of Local SelfGovernment,
18, 71-93.
50) 彭, 宁. (2023). The Impact of the Development of Digital Inclusive Finance
on the Local Government Fiscal Revenue in China-Based on the Provincial
Panel Data. Sustainable Development.
51) Allers, M., & Rienks, H. (2024). Voters' influence on local tax policy.
European Journal of Political Economy.24 --
You should also actively pursue policies to become financially
independent so that you don't need central government support.
4. Conclusion
Local taxation issues in local governments include revenue imbalance,
lack of collection efficiency, heavy tax burden, and unbalanced tax rates.
To address these issues, it is necessary to diversify local tax revenues,
improve the collection system, rationally distribute the tax burden, and
strengthen tax rate equity. In addition, it is necessary to strengthen the
financial independence of local governments to reduce their dependence
on the central government and enable them to operate independently. By
moving in this direction, the local tax system in local governments will be
more efficient and fair.25 --
References
National Literature
Kim, Sang-Soo, & Tak, Hyun-Woo (2020). Analyzing the influencing
factors on local governments' efforts to secure non-tax revenues: A review
of demographic, , and financial aspects. Financial Studies, 13(3), 95-129.
Kim, Jin (2021). Local tax exemption/reduction and local economic
growth: Focusing on the effects of basic and metropolitan local tax
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