Local gov’ts raise resident tax rates up to 100%

Local governments throughout the country are raising, and in some cases doubling, the resident tax rate to 10,000 won ($9), inciting much protest from residents.

As of August 1, 25 out of the 31 cities and counties in Gyeonggi raised the resident tax to 10,000 won.

The tax raise also applies to foreign residents of the cities and counties under question, but foreign residents must first confirm whether they are by law deemed a taxpayer by the local government, given that different circumstances can exempt a foreign resident from resident tax.

Seongnam of Gyeonggi will maintain its 4,000 won resident tax, and Seoul will also maintain its 6,000 won resident tax this year. But the ongoing spree of resident tax hikes continues to expand to other regions.

In North Chungcheong, all local governments have raised the resident tax to 10,000 won.

In Gangwon, resident taxes that ranged between 2,000 won and 6,000 won were all raised to 10,000 won last year.

And all counties and cities in North Gyeongsang, except Pohang, raised the resident tax to 10,000 won last year.

“We raised the resident tax due to rising prices in general, but also because the Ministry of the Interior recommended it,” said an official of the Gapyeong County Office.

Gapyeong raised its resident tax by 100 percent, from 5,000 won to 10,000 won this month. The Ministry of the Interior announced last month that it will reduce the amount of tax allocated to local governments by 24 billion won next year, as a penalty on local governments that expended extraneous government funds or neglected to adequately collect and manage taxes.

“If the city government does not raise the resident tax,” the official said, “its local tax grant will be reduced by 560 million won next year.”

With the raise, Gapyeong’s tax revenue will rise by 130 million won annually.

Counting the fact that it will be exempted from the ministry’s subsidy reduction once it raises the resident tax, Gapyeong will save some 690 million won from its resident tax raise.

While local governments pointed to the ministry as having incited their mass resident tax hike, the ministry denied having encouraged it.

The Ministry of the Interior motioned to pass an amendment on the Local Tax Act in 2014, which would have raised resident taxes throughout the country, but decided not to push the bill through after facing opposition in the National Assembly. The bill was discarded after the 19th National Assembly ended its term.

“Article 78 of the Local Tax Act limits the tax rate for individuals to 10,000 won,” said a Ministry of the Interior official. “The decision to raise the tax is completely up to the local governments and the ministry has no plans to push for an amendment on the act or a raise in the resident tax.”

The official added, “As for the subsidy reduction policy, the ministry has been implementing it since 2000 and it is nothing new.”

But for those paying the tax, a 100 percent tax raise is not welcome news.

“The fact that some of these local governments are raising the tax without informing residents will cause some communication problems,” said Park Wan-ki, a policy advisor at the Gyeonggi branch of the Citizens’ Coalition for Economic Justice.

“The central government is passing the buck to secure enough tax revenue by making local governments collect more taxes,” said Bae Jung-ah, professor of public administration at Chonnam National University in Gwangju, South Jeolla. “Some serious restructuring of tax collection is needed in both the central and local governments.”

BY JEON ICK-JIN, WE SUNG-WOOK [chung.juhee@joongang.co.kr]