Government announces plans to aid financing at local governments
Economic policymakers on Tuesday released a set of measures to support local governments that have been under a mounting financial burden.
The problems at local governments have worsened since the central government expanded the country's free child care system and lowered an acquisition tax to revitalize the housing market earlier this year.
Now, the central government says it will increase state subsidies for free daycare services by 10 percentage points from its current ratio.
That means the central government will soon be covering 30 percent of the total cost in Seoul and 60 percent for other regions.
"We are making up for a shortfall in the local governments' revenues caused by last month's comprehensive real estate measures. We will also ease their financial burden heightened by the free child care services."
To make up for the shortfall in tax revenue caused by a cut in the home acquisition tax,.. the local governments will be allowed to increase their consumption tax.
The consumption tax will gradually increase from the current 5 percent to 11 percent by 2015, which will create new revenues of about two.six trillion won, or two.two billion U.S. dollars.
These measures are being met with great resistance from local governments, however, as they fall short of their original demands.
The city of Seoul, in particular, said in a statement following the announcement that even with the new measures in place, it will need about three-hundred million U.S. dollars to fund an expanded child care program next year.
Yoo Li-an, Arirang News.
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