Basic Report

The purpose of this study is to suggest improvement plans to local finance mediation system through analyzing limitations and fiscal impacts of financial decentralization progression scheme to local finance.
   Current financial decentralization is on the way without discussion development direction to future local finance, only focusing on increasing local consumption tax rate. That is why local finance decentralization has dealt without reviewing local functhional mediation between local governments. Besides, local financial decentralization only concentrates on increasing local tax rate such as National tax(70%): Local tax(30%).
   In other words, current financial decentralization only focuses on distribution to taxation sources without reviewing baseline to intergovernmental financial mediation systems. Thus, it is important to discuss improvement plans to intergovernmental grants as well as redistribution to national taxation sources.
   Regarding to increasing local tax in national taxation system, it is necessary to examination to distribution state to national functions with point of view to intergovernmental relations. In doing so, rational foundation to rearrangement to intergovernmental financial relations could be built.
   In hence, the role of local finance mediation system is very important two viewpoints as equalization and conservation of financial resources.
   First, it needs to improvement plans to local financial mediation system with solving financial imbalance among local governments.
   Second, it needs to improvement plans to local financial mediation system with solving lack of fiscal resources of local governments. Moreover, fiscal imbalance among local governments is enlarged. It is because that much of function is empowered to local governments and those functions requires additional financial sources.
   Therefore, it is important to improve development plans to local mediation system with financial environmental change. Also, it needs to improve two major local financial mediation systems such as local allocation tax and national grants. The key point is improvement to local allocation tax with concentrating on conservation of financial resources not fiscal equalization.
   Finally, this study is to suggest “local financial equalization funds” as improvement plans. Also, this study is to suggest improvement plans to local financial mediation system base on analyzing scenario simulation analysis and forecasting future impacts of financial decentralization.