The Korea Local Administration Review

This paper aims to investigate the corporate hometown tax implemented as an aspect of the local revitalization policy in Japan to enhance local economy, and to examine its implications for Korea. Unlike Japan, Korea does not operate the corporate business tax as a local tax deductible for the corporate hometown tax, and the burden of corporate inhabitant tax is also lower than in Japan. It means that if Korea were to implement corporate hometown tax like Japan, it would have the difficulty to prepare a tax deduction system at the same format of the Japanese one, such as the deduction of corporate business tax in local tax items. This paper provides its implication for Korea referring to the differences in operating the corporate hometown tax and the local tax systems between the two countries: Korea may create the corporate hometown tax with the tax deduction in corporate income tax of central level. In addition to it, we suggest other implications: the necessity to deal with the problems of malicious use by the firms and the collusion between firms and local governments, the harmonization among the ministries in charge and the need to adjust its office, and the requirement to make efforts to propose common values between public and private sectors.