The Korean Economic Forum
Corporate Tax Reform: A Scheme for Fiscal Decentralization and Regional Development
Jin Park (KDI School of Public Policy and Management), Sunhwa Lee (Korea Institute of Local Finance), Jin-Yeong Kim Konkook University), Deockhyun Ryu (Chung-Ang University) and Heonjae Song (University of Seoul)Year 2018Vol. 11No. 1
Abstract
We design a tax scheme featuring revenue sharing of corporate taxes aimingat both fiscal decentralization and regional development. The scheme firstdivides up total tax revenue to central and local governments. The revenuebelonging to local governments is distributed to each government by the ratesdifferentiated by the level of regional development. Tax burden under thejurisdiction of central government are subject to differential reduction rates bythe same criterion. The simulated outcomes show that this scheme help fosterlocal governments fiscally independent from central authorities so as to be moreaccountable to public expenditures. It is also favorable to regional developmentin that firms are given an economic incentive to relocation.}