Gyeonggi Province Urges Restraint on Tax Rate Cuts

Gyeonggi Province on the 8th repeatedly urged restraint on cutting property tax rates, warning that municipalities that reduce property taxes will receive fewer government grants in the future and face severe fiscal difficulties.

The province stated in a press release that day, "As the government-level financial penalty system for flexible property tax rate reductions becomes a reality, municipalities that reduce property taxes will receive fewer government grants," and cautioned that "tax rate reductions by some cities and counties risk undermining tax burden equity between municipalities and will result in reduced tax revenue."

The province explained that in the case of Guri City, which cut property tax rates by 50% in 2004, it could secure 11.96 billion won in property-tax-related revenues including property taxes and grants, but experienced a total revenue decrease of 3.869 billion won, comprising a 1.352 billion won reduction from the property tax cut, a 1.352 billion won cut in real estate grants, and a 1.165 billion won reduction in general grants.

In relation to this, the Ministry of Public Administration and Security plans to apply financial penalties to municipalities that reduce property tax rates by excluding the portion of tax revenue decline due to flexible rate application from the compensation target when allocating real estate grants distributed using comprehensive real estate tax as a revenue source, and by reducing general grants when calculating general grants.

Meanwhile, in Gyeonggi Province, 14 cities and counties reduced property taxes by 20-50% last year, and this year Ansan City decided on a 50% reduction, while Siheung City, Gwangju City, and Hwaseong City are reviewing reductions.