Public Finance and the Tax System ; Structural Reforms toward the Decentralized Socierty

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After Mac, men, of the Onmibus Decentralization Act of 2000, the national-local fiscal relations have now entered a new phase. Agency delegted functions had been abolished and tax autonomy of local governments has been strengthened by the Act, while drastic refoms in the local revenue system have not been made and local taxes, local allocation tax and national treasury disbursements have not been changed to realize the desirable state of decentralization. Besides, fiscal management of local governments has not been improved yet and it isn't fit to the decntralized fiscal system.From the viewpoint of public finance, accounting and law, our two-year research project is focused on what the local fiscal sysytem should be.Our conclusion is as follows : Major local taxes such as inhabtants tax and local consumption tax should be reformed to expand total revenue of local governments, and fiscal transfers from national government to local governments should be reduced to decrease the national control on local local governments.As a gap in fiscal capacity among localities would be enlarged by such a reform, our reccomendations are that local economic system be reorganized tobe independent without public works funded by the national government and that the national government provide a proper local finance adjustment system which guarantees a real minimum standard of public services. In order to improveefficiency in local governnance, the role of local governments, which had been too much enlarged in 1970s, and the ways of service provision should be also reviewed, and new public management measures must be more applied by local governments.In conclusion, market mechanism should be introduced into more aspects of local public finance through an introduction of the Private sector vitalization and an utilization of the bebefit principle.