Relationship between the Changes in Policy Tools of the Central Government and the Local Fiscal Structure: Focused on the Changes in the Transaction Taxes

• Main Authors: Miae Lee, Inseok Seo
• Format: Article
• Language: English
• Published: World Association for Triple Helix and Future Strategy Studies 2017-06-01
• Series: Journal of Contemporary Eastern Asia
• Subjects: fiscal policy; policy tools; local fiscal structure; transaction tax change
• Online Access: http://koreascience.or.kr/article/JAKO201724655834858.pdf

This study aimed to determine the changes in the local fiscal structure brought about by the change in the transaction tax, including the acquisition tax, by the central government. The review of the analysis results proved the following. First, the government’s transaction tax exemption policy effectively influenced the expansion of the local fiscal budget. Transaction tax exemptions such as acquisition tax exemptions would not contribute to the expansion of the local fiscal budget in the short run, but may do so in the long run. Second, the review of the effect of the transaction tax exemption policy by the central government on the local fiscal structure confirmed that its impact on the local fiscal structure may vary depending on the timing of such tax exemption. Third, the overall local fiscal structure as a result of the transaction tax exemption by the central government was confirmed to have been influenced more by the fiscal capability of the local government than by the income level of the local residents. In conclusion, the stimulation of real estate transactions using tax tools may positively influence the overall fiscal structure of local governments, but it would also put pressure on the fiscal management of local governments because it is largely influenced by the fiscal capability of the local governments.