SUWON — Gyeonggi Province Governor Choo Mi-ae said on the 29th that the government's planned Future Response Fund "must reflect reinvestment in the regions that contributed to generating the additional tax revenue."
Choo made the remarks at a party-government meeting on the creation of the Future Response Fund and the restructuring of the local allocation tax system, held that morning at the National Assembly under the auspices of the Democratic Party of Korea and the government.
The Future Response Fund is a national fund that sets aside tax revenue collected beyond projections, driven by factors such as the semiconductor boom, and invests it in four areas: young adults, growth engines, regional development, and education and talent. Under the government plan, the fund is estimated at 162.3 trillion won next year.
"I agree with the purpose of creating the fund," Choo said, "but it will be difficult to achieve the policy goals if we turn away from the contributions and burdens borne by local governments that have underpinned national finances."
"Resources must follow where the burden lies," she added. "Responsible judgment from the government and the party is needed so that Gyeonggi Province — with its large population, businesses, jobs and scale of national policy implementation — can play its role."
Gyeonggi Province put forward three proposals on the operation of the fund. The core elements are reflecting each region's contribution to generating additional tax revenue, converting the youth basic income program into a national pilot project, and improving the allocation criteria for the regional future growth support fund.
First, the province said reinvestment in revenue-generating regions is needed under the growth engine account. "The fund's main revenue sources are not unrelated to the performance of industrial sites in Gyeonggi Province, such as Yongin, Pyeongtaek and Icheon," Choo said. "Semiconductor production hubs require enormous fiscal resources to build power, water, transportation networks and living conditions."
Accordingly, the province called for including a region's contribution to tax revenue, the scale of investment in national strategic industries and the concentration of related companies among the criteria for selecting fund projects. It added that the share of national funding for large-scale strategic industry infrastructure should be raised, and that full state funding should be considered where necessary.
On the youth account, the province proposed converting the youth basic income program into a national pilot project. "Current youth policy is concentrated on young people who meet specific requirements such as employment, housing or asset building," Choo said. "We need policies that provide an equal starting line for all young people."
Gyeonggi Province's youth basic income program pays 24-year-olds 250,000 won each quarter, or 1 million won a year, in local currency vouchers. The province argues the program should be piloted at the national level, with common nationwide minimum support standards to narrow gaps in youth support between regions.
For the regional account, the province called for adjusting the allocation criteria for the regional future growth support fund. "If the existing ordinary local allocation tax formula is applied as it is even though additional revenue has been generated, Gyeonggi Province, which receives no ordinary local allocation tax, could again be excluded from the allocation," Choo said, calling it "a contradiction and reverse discrimination."
The province proposed a new allocation formula of 30% for basic distribution, 40% for balanced development and 30% for future growth demand. Under this approach, all local governments would secure a certain level of resources, while population, gross regional domestic product, investment demand and contribution to the national economy would also be taken into account.
Gyeonggi Province also proposed improving the criteria for calculating the ordinary local allocation tax, raising the local consumption tax rate, converting the tobacco consumption portion of the local education tax into a regional resource facility tax for fire services, and transferring a portion of corporate tax to metropolitan-level local taxes.
The meeting was attended by Democratic Party leaders, government officials and 12 metropolitan mayors and governors from the party, including Choo, who discussed the fund's impact on local finances and directions for institutional reform.
