The Korea Local Administration Review

This research examines the method to introduce local consumption tax. Local consumption tax is required to conform the tax collection region of the present VAT to the destination of the consumption tax. To do so, the retail tax basis or regional domestic expenditure were selected as the consumption index by which the regional consumption scale could be identified. This research analyzes the pervasive effect on local finance by introducing the local consumption tax. Ten percent of the amount of VAT is fixed as the source of tax revenues. Then, tax yield is designed to be distributed by consumption index (retail tax basis or regional domestic expenditure). The results of the analysis show that local consumption tax will not disturb local tax distribution.