The Korea Local Administration Review

 
For three consecutive years over 2012~2014, tax revenue failed to reach the projected level estimated by the government and even the deficiency of tax revenue was getting worse gradually. Although an increase in tobacco prices in 2015 succeeded in easing the tax revenue deficiency problem, the accuracy of tax revenue assessment still keeps generating controversial issues in the Korean economy. To estimate tax revenue precisely, it is important to investigate closely whether the degree of elasticity of tax revenue to economic growth has been fluctuated. For that reason, this study examines ‘to what extent’ as well as ‘in which tax item’ the degree of a tax revenue elasticity has changed across the global financial crisis that brought about a deep economic recession and a structural shift in our economy. Also, by intercomparing the recent degrees of a tax revenue elasticity among several tax items, it will be analyzed that ‘in which tax item’ the level of fluctuation of taxgathering is large or small under the current economic downturn. In so doing, this study uses panel data of 16 local governments across recent 13 years in Korea to empirically analyze the elasticity of tax revenue to GRDP by the major tax items of national and local taxes. The analysis results show that the revenue elasticities of corporation tax and local education tax have increased crossing over the financial crisis but other tax items have kept the same level in their revenue elasticity. The increase in tax revenue elasticity after the financial crisis means that those two taxes’ revenues have decreased as they react more sensitively to the economic slowdown. When the revenue elasticities of the major tax items after the financial crisis are arranged in ascending order of size, it is as follows: tobacco consumption tax, property tax, automobile tax, income tax, acquisition tax, local education tax, corporation tax. This result says that tobacco consumption tax can be relatively most favorable for stably gathering tax, because a tax item with a small tax revenue elasticity reacts less sensitively to the economic downturn. It will strengthen a staunch initiative of the tax policy in a low-growth economy to figure out precisely the changes in the elasticities of tax revenues over the economic event that causes a great shift in economy.
 
□ Keywords: tax revenue elasticity, national tax, local tax, panel-data analysis