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Research Report

A study on legal and institutional measures for local subsidy management innovation
  • Issue Date 2021-09-30
  • Page 89
  • Price 5,500
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Ⅰ. Backgrounds and Purposes
▶ 2021, enactment and enforcement of 「Local Subsidy Act」
○ Legalization of the local subsidy system regulated by the 「Local Finance Act」, legislation enacted in January
- The existing 「Local Finance Act」 covers the basic principles of fiscal management of local governments and management and operation plans in various fields such as budget, settlement of accounts, subsidies, and bond management.
- In order to reorganize the subsidy operating system and improve operational performance, it is divided according to the need to establish a separate law on matters related to budget formation and delivery procedures for subsidies paid by local governments, execution and management of subsidies, etc.
○ As it is implemented from July, it is necessary to interpret and apply the law suitable for the specificity of local subsidies.
- Matters related to the management and operation of local subsidies are separately stipulated in this Act to reflect the special characteristics such as the type and nature of local subsidies that are different from national subsidies
- The law aims to promote the proper payment and efficient management of local subsidies by reorganizing and strengthening the current local subsidy management system. Therefore, it is necessary to analyze and operate the system reflecting the special characteristics of local subsidies in the legal system and local finance policy.
Ⅱ. Major Content 
▶ A subsidized relationship is a relationship in which a subsidized person partially subsidizes the expenses incurred in the business of the subsidized person.
○ Subsidized business is the business of the person receiving subsidy, unlike the entrustment of office work.
- The essential characteristic of a subsidized relationship is that the subsidized person, that is, the subsidized business operator, plans a business and applies for subsidy for business performance expenses.
- However, in the subsidized relationship between local governments, it is possible to conduct projects planned by subsidizing local governments rather than by subsidizing local governments.
○ In the 「Local Subsidy Act」, the term local subsidy includes both subsidies to the private sector and subsidies to local governments.
○ Considering that the essence of the legal relationship of local subsidies is financial subsidies for business operators, subsidies between local governments and subsidies to the private sector should be distinguished.
▶ For private local subsidy projects, it is necessary to reorganize the jurisdiction over the subsidy status under the 「Subsidy Act」 and 「Local Subsidy Act」
○ In the case of metropolitan/basic/private matching projects, it is necessary to stipulate in the law how to revert the legal status of subsidies between the metropolitan and basic local governments.
- The current 「Local Subsidy Act」 provides regulations by supposing a 1:1 relationship between the subsidized person and the subsidized person.
- In reality, wide-area, basic, and private matching methods are being actively used.
- In this situation, in order to reduce the confusion of legal application and subsidized administration, it is necessary to clarify in the law which local government belongs to the status of the subsidizer when a local subsidy is issued for a single subsidized project with both a metropolitan area and a basic subsidy.
○ In the case of national, local, and private matching projects, the same problem is a problem between the central government and local governments, so consistent regulations between the two laws are required.
- In the case that a national subsidy and a local subsidy are issued together for one subsidy project, the 「Subsidy Act」 should be applied to the national subsidy and the 「Local Subsidy Act」 to be applied to the local subsidy.
- In this case, a problem arises between the central government (the state) and local governments (province or city and city and county), the attribution of the assistant's status, and the issue of jurisdiction between the two laws.
- Reorganization of jurisdiction between the two laws is requested due to the fact that it is a single project based on the project and that the law that the private sector must consider may become too complicated.
▶ The management of local subsidies for public organizations should be regulated by the issue of sharing of administrative expenses among local governments.
○ If the recipient of the subsidy is a local government, it should be regulated as a matter of sharing the expenses for public affairs of the local government among the local governments.
- The general authority and responsibility for the performance of office work among local governments is regulated by the 「Local Autonomy Act」, and the method of sharing expenses for the performance of these duties is regulated by the 「Local Finance Act」.
- Therefore, in the 「Local Subsidy Act」, it is necessary to stipulate the procedures and authority on the relationship between public organizations and local subsidies in a consistent manner in relation to the 「Local Autonomy Act」 and 「Local Finance Act」.