Gyeonggi Province Overcomes 'Fiscal Crisis' Through Three Pillars: "Structural Adjustment, Revenue Expansion, and Tax Reform"

On the 31st, Gyeonggi Province announced the results of activities by the "Fiscal Crisis Overcoming Strategy Task Force," which has been in operation since Governor Choo Mi-ae's declaration of "fiscal emergency" for Gyeonggi Province on the 5th of last month.

Economic Vice Governor Ju Hyung-chul, who is heading the task force, stated that day, "Gyeonggi Province's consolidated fiscal balance—net fiscal expenditure subtracted from net fiscal revenue—has recorded deficits exceeding 1 trillion won annually since 2022, and considering revenue forecasts and expenditure scale, next year's deficit is expected to expand further."

Vice Governor Ju presented three major countermeasures: △comprehensive budget restructuring for 2027 including project re-examination from ground zero △securing additional 1 trillion won or more in revenue during the ninth elected term △pursuing four major tax reforms including raising local consumption tax rates.

◇ Projects Review from Ground Zero for 2027 Main Budget Through Sunset Clauses for Duplicate Projects and Enhanced Evaluation Feedback

First, as key criteria for the "2027 Main Budget Compilation Direction," six standards were presented: △re-examining projects continuing for three years or more from ground zero △in principle, implementing sunset clauses for duplicate projects between departments or duplicating city and county projects △comprehensively re-examining large-scale project implementation methods △concentrating on "metropolitan" unique administrative affairs △actively reflecting evaluation results—including fiscal project evaluations, subsidy project evaluations, and investment project reviews—in budget compilation to reduce or sunset low-scoring projects △mandating submission of funding acquisition plans when pursuing new projects.

Vice Governor Ju emphasized, "Concentrating on citizens' safety and strengthening livelihoods, compiling budgets that secure minimum future opportunities, saving significantly where possible and spending better where needed—this is the direction of fiscal restructuring pursued by Gyeonggi Province administration," and stated, "We will continue to discover projects that can actually expand policy effectiveness without major fiscal investment by converting direct financial support methods into non-budget projects utilizing administrative and network capabilities."

◇ Target of 1 Trillion Won Revenue Expansion by 2030 Through Delinquent Tax Collection and New Tax Base Development

The task force presented measures for securing local taxes and non-tax revenues: △strengthening delinquent tax management to realize tax justice △actively developing new tax bases such as attracting commercial vehicle registration △promoting stable dividend collection from public enterprises funded with provincial citizens' taxes.

Vice Governor Ju stated, "These three measures are issues that can be promoted solely through provincial administrative capacity without separate legal amendments," and said, "We will definitely achieve the target, and we will continue to explore additional revenue securing measures including asset sales."

◇ Presenting Tax Reform Agenda in Line with National Task of 7:3 Ratio Between National and Local Taxes

Economic Vice Governor Ju Hyung-chul emphasized, "The fundamental cause of Gyeonggi Province's fiscal crisis is an outdated fiscal structure remaining in the development era, and reforming this old structure is very urgent and pressing," and stated, "The central government has already announced a national task to raise the ratio of national to local taxes to 7:3, and the task force has prepared tax reform measures in line with this."

Specifically, the system improvement tasks presented by the province are as follows:

△raising the "local consumption tax" rate—a relatively stable revenue source compared to acquisition tax—to 40 percent within the term △converting the local education tax portion of tobacco consumption tax scheduled for sunset into a regional resource facility tax, to be used as funding for firefighting and safety △adjusting 5 percent of corporate tax as revenue for metropolitan local governments △adjusting the calculation of Gyeonggi Province's standard fiscal demand and standard fiscal revenue to match reality so that it can receive ordinary transfer grants

Vice Governor Ju stated, "All four are difficult tasks, but must be done to stably take responsibility for citizens' safety and livelihoods and prepare for Gyeonggi Province's future," and said, "However, most require legal amendments and cannot be accomplished by provincial efforts alone. In addition to the provincial council, we will coordinate with 31 cities and counties within the province and the nationwide city and provincial governors' council, and mobilize all provincial capacities including close consultation with the National Assembly and central government."

◇ Establishing Implementation System and Local Finance Coexistence Consultative Body with Provincial Council for Full-Scale Promotion

The task force plans to establish an implementation system with two axes—a revenue securing promotion team and an expenditure restructuring promotion team—to continue implementation and monitoring according to the strategy organized in the task force. The plan is also to establish a "Local Finance Coexistence Consultative Body" with the provincial council to continuously cooperate closely on the province's fiscal normalization measures.

Additionally, it was announced that communication will be strengthened at all times so that citizens can understand this process in detail, and opportunities to explain will be provided at important junctures.

Vice Governor Ju, through closing remarks, reemphasized, "It is an important principle of provincial administration that unnecessary and customary projects or projects with minimal outcomes relative to invested resources will be boldly reorganized and reinvested in projects that citizens can actually feel," and stated, "True balanced growth is not growth in which Gyeonggi Province is marginalized, but growth where Yeongnam, Honam, Gangwon, Chungcheong, and other regions grow together with Gyeonggi Province creating synergy," and appealed to the central government and National Assembly that concrete local financial decentralization roadmaps must be promptly prepared for the success of balanced development and local-led growth that the current government emphasizes.

Meanwhile, the Fiscal Crisis Overcoming Strategy Task Force for Gyeonggi Province, headed by Economic Vice Governor Ju Hyung-chul, involved director-generals from various bureaus and divisions, the Gyeonggi Research Institute, and external experts, and conducted intensive discussions over seven meetings spanning three weeks, beginning with the first meeting on the 10th.