Gyeonggi, Chungbuk Governors Join Forces on Local Finance Reform

SUWON — Gyeonggi Province Governor Choo Mi-ae and North Chungcheong Province Governor Shin Yong-han have launched a joint push to address what they describe as a fiscal crisis facing local governments.

Choo visited the North Chungcheong provincial government office on the 7th to meet Shin and exchange views on the fiscal strains both provinces face.

Choo said that pursuing industrial policy tailored to regional strengths requires a minimum revenue base, but that local governments are confronting a severe fiscal crisis. Citing semiconductor industrial complexes as an example, she said Cheongju has built an industrial base around companies including SK hynix, yet North Chungcheong bears the infrastructure costs without receiving an adequate share of the resulting surplus tax revenue. She added that Gyeonggi Province likewise shoulders the burden of building and maintaining power, water and road infrastructure but receives none of the corporate tax revenue, and stressed that 5% of the corporate tax, currently a national tax, should be allocated to metropolitan and provincial governments.

Shin said North Chungcheong and Gyeonggi differ in scale but share much in industrial structure, noting that large companies including SK hynix, LG Chem and LG Energy Solution form a strong axis centered on Cheongju. He said he understood there had been little opposition to the proposal to allocate 5% of the corporate tax to provincial governments at the Governors Association meeting, and that because the measure requires legislative revision, the government and the National Assembly should work together on it. North Chungcheong supports the proposal, he said.

Firefighter payroll costs were another key item on the agenda. Choo said that if firefighting has been brought under national civil service status, the central government should also bear the payroll costs, and criticized the state for failing to meet its responsibilities while passing facility and equipment maintenance costs and wages on to local governments. She said firefighter payroll costs nationwide amount to roughly 6.5 trillion won ($4.7 billion), with Gyeonggi Province alone bearing more than 1 trillion won, and urged the central government to resolve the payroll issue first as the most pressing problem.

Shin agreed on the need to transfer revenue tied to the tobacco consumption tax to local governments, but said careful analysis was needed to determine whether housing welfare or firefighter payroll costs would deliver greater practical benefit to the provinces. He added that he would coordinate with Choo to align their positions.

The two governors also found common ground on raising the local consumption tax rate. Choo said the local consumption tax share should be raised in stages from around 25% to 40%, proposing annual increases of 5 percentage points to reach 40% within the current administration's term. Shin said he broadly agreed with a plan to gradually raise the rate from 25.3% to 40.3%.

Shin also described overcrowding in the greater Seoul area as both a risk and an opportunity for North Chungcheong. He said industrial development could be pursued jointly in areas bordering Gyeonggi such as Jincheon, Eumseong and Cheongju, and expressed hope that Yongin and Cheongju would develop a mutually beneficial relationship, particularly in semiconductors.