Abstract

Many local governments have tried to attract enterprises with the hope of increase of local tax. There, however, has been no case study about the effect of the enterprise attraction on the increase of local tax. The purpose of this study is to evaluate the contribution of enterprise attraction to the increase of local tax, with the case of the Hite Bear factory in Hongcheon, Gangwondo.The factory was found to have made a very little contribution to local tax increase. Surprisingly, 99.8% of total tax paid from 1996 to 2003 by this factory was national tax while only 0.2% of the amount was local tax. The profits analyses about the tax payment elasticity with the results of this case study show that the enterprise attraction has made much more contributions to the central government than to the local autonomy. There should be some improvement, in relation with enterprise attractions, on both of national tax and local tax system. For example, some part of national taxes, like the liquor tax, the value add tax or enterprise tax, are recommended to be transferred to local tax. Also, current local development tax rate should be increased.

Keywords

• enterprise attraction
• local tax
• Hite Beer

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