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More local governments suffer from bad finances

The financial health of provincial governments is getting worse due to stagnant local tax revenues and increasing welfare demand, the home affairs ministry said Tuesday.

The average ratio for measuring their financial independence from the state was 51.9 percent as of this year, 5.3 percentage points lower than seven years ago, the Ministry of Public Administration and Security said in a statement.

The rate was also 0.3 percentage points lower than a year ago, marking the third year in a downward spiral, it said.

After peaking at 57.2 percent in 2004 from 56.3 percent in 2003, the ratio of local-tax and non-tax revenues in a local government’s general account budget decreased to 56.2 percent in 2005, 54.4 percent in 2006 and 53.6 percent in 2007.

Officials attributed the worsening conditions to the slowing real estate market and increasing demand for welfare services. Real estate acquisition and property taxes are local administrations’ major sources of income.

The rate for the Seoul Metropolitan Government, whose financial health was the best among all local administrations, increased 4.8 percentage points from last year’s 85.8 percent to over 90 percent.

But the share is still low compared with 96.1 percent in 2005, according to the ministry.

The average for 25 smaller-level municipal governments in the capital was only 47.7 percent, it added. 

(Yonhap News)
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