Sunday, December 14, 2003

"Tax Bomb"

The Ministry of Government Administration and Home Affairs is being accused of threateningan excessive hike by altering the property tax calculations. This obviously pits Metro Goverment against the Central Government since property taxes are in the realm of local government, not central government.

MOGAHA is justifying its actions by saying that the reforms will address problems of disequilibria in the current system (in Korean). But the action is coming across that has some expressing doubt and predicting trouble ahead. The Korea Herald expounds,
It should not surprise anyone if taxpayers put up resistance under these circumstances. Few would believe it is reasonable to raise taxes seven-fold at a stroke, even if the new astronomical rate applies only to a select few. In addition, longtime residents will make a convincing case if they claim that they are being victimized, as they have taken no speculative action.

The Chosun gets a little more riled up about the issue,
Such has become the situation, and yet the ministry [MOGAHA] is being stubborn enough to say it's going to push ahead according to the government's plan. Indiscriminate bombing of the people with "tax bombs" is predictably going to invite tax resistance, so it appears to have the crazed idea that being obstinate about the whole thing will save the government's pride.
If this does blow-up I doubt anything will save the government's pride.

But there is something further to consider, I think, in this issue. As the Chosun notes,
The same goes with the ministry's consideration of a plan in which the range within which regional autonomous bodies can adjust tax rates would be reduced from the current 50 percent to between 10 and 30 percent. It's like saying that if smaller governments want to fight the increases, they the ministry is going to have the law changed so it can force the issue anyway. If the national government really does have any desire to open a new era of regional, de-centralized governance, then it should cease this unjustified stubbornness and give ear to the views of regional autonomous governments.
As far as I am aware from a previous look into local government, while they do have the power to raise taxes within a certain band, they have rarely (maybe even never) actually altered the tax rates under their jurisdiction. Raising taxes is obviously unpopular and the system is currently structured that any short-fall in budget will be made up by central government via transfers. This negates any incentives local government might have to arbitrarily increase the taxes.

However, central government's prescription of reclaiming the right to increase taxes seems an inadequate way to address this problem. It seems to be a systemic issue embedded in the structure of local government taxing policy and transfers. Therefore fixing the issue is not to have central government reclaim a right that belongs to local government as this will only weaken the progress of decentralisation and create animoysity between central and local levels.

Unrelated to Korea
I finished my first quarter at Stanford! Hoorah! Now I have "time-without-classes" to busily get started on my thesis.

Currently reading:

"Hell" by Yasutaka Tsutsui