Year of Publication

2012

College

Martin School of Public Policy and Administration

Executive Summary

Seoul Metropolitan Government (SMG), South Korea, introduced the Shared Property Tax System in 2008 in order to mitigate fiscal disparities among twenty five autonomous districts located in its jurisdiction. The new program, introduced at the end of a long controversy, was influenced by St. Paul-Minneapolis (Twin Cities) Metropolitan Area Fiscal Disparities Program in Minnesota.

I examine two questions in my capstone project: (1) whether the program has increased fiscal capacity 1 of each district over the last five years as policy makers expected, and (2) whether the program of the SMG has contributed to relieve fiscal disparities among localities.

To examine the research questions, I utilized the Standard Financial Needs Satisfaction Index (SNFSI) 2 , based upon the amount of property tax collections of twenty five localities and the impact over ten years from FY2003 to FY2012, measuring the program five years before and after introduction of the program, in order to assess the outcomes of the program. The data were collected from the Budget Office, the Administration Bureau, and the Finance Bureau of SMG via its official website or personal contact with officials in charge. I used Ordinary Least Squares (OLS) model. In the model, dependent variables are absolute values of the Z-scores of SFNSI and property tax revenue of each district in each year and explanatory variables are program, population, and total general fund.

The results of my analysis indicate that the differences in amounts of property tax collections between twenty five localities have been reduced since the program was introduced in 2008. In addition, the index of financial capacity, SFNSI, was improved in poorer localities over the duration of the study. In respect to wealthier localities, net contributors to the pool sources, the SFNSIs have decreased by a minimal amount.

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