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This study attempts a historical analysis to investigate the evolution process of the local finance system in Korea. The case in this study is of the Local Tax Act and the Local Finance Mediation System of Korea.
The evolution of the local finance system shows unique characteristics affected by the environment, including all aspects of the economic, political and socio-cultural institution that are specific to Korea. The major findings show that the path-dependent local finance of Korea leans toward the central government and that there is a big gap between the revenue sources of the local and the central government. Korea's local finance evolved around the inflexible property tax, which is also difficult to expand, and around a rigid and uniform local tax system.
At the same time, the local finance system has gone through incessant fluctuations and mutations due to the external and internal environment and by learning through trial and error. Each case showed various aspects in the rules and conventions of local finance, tax rate and revenue, and the ratio and structure between national taxes and local taxes by interaction of complex elements.
