central government often requires modifications to a project so that it will conform with central govermnent standards. Needless to say, almost all local governments accept the conditions required. Conditions accompanying the allocation of a specific purpose disbursement provide the central government with a powerful means of control over the activities of the local governments.

# Local Tramsfer Taxes

**In** addition to local allocation tax and the central government specific purpose disbursements, the local governments also receive several relatively small transfer taxes from the central government. These transfer taxes include Consumption Transfer Tax, Local Road Tax, Petroleum Gas Transfer Tax, Motor Vehicle Tonnage Tax, and Aviation Fuel Transfer Tax. In 1990, they accounted for about 2.7 percent of total local revenues. Consumption Transfer Tax is the largest transfer tax among the five and is transferred to both prefectures and municipalities. -Six eleventh the total Consumption Transfer Tax goes to the prefectures and five eleventh to the municipalities. Each local body receives the amount based on its population and the number of workers employed in its jurisdiction. This tax is earmarked for uses specified by the central government. Local Road Tax, Petroleum Gas Transfer Tax, and Motor Vehicle Tonnage Tax are all earmarked for road construction and maintenance. Aviation Transfer Tax is earmarked for the prevention of nuisance caused by flight noise and the improvement of the environment of airports.

## 2.8. Korea1<sup>4</sup>

Initergovernmental fiscal transfer in Korea is administered through five major transfer mechanisms. They are (1) Local Shared Tax; (2) National Treasury Subsidy; (3) Local Transfer Fund; (4) Adjustment Allocation Grant; and (5) Provincial Government Subsidy. The first three transfers are distributed from the central to provincial governments, while the latter two are transfers from major cities or provinces to lower level governments. The Local Shared Tax and National Treasury Subsidy are the traditional means utilized by the central government to transfer certain fiscal resources to local governments. The Local Transfer Fund, introduced in 1991, can also be categorized as a mechanism to transfer a. portion of the fiscal base of the central government to local governments except that the transfer is made directly out of national tax revenue without having the revenue accounted for first in the central government budget. According to the 1994 budget, Local Shared Tax accounted for 12.2 percent of total local government revenue, National Treasury Subsidy accounted for 7.5 percent, and Local Transfer Fund accounted for 5.0 percent. The last two mechanisms are the means used by the regional governments to transfer some of their fiscal resources to municipal districts, municipal governments, and the rural county governments.

**Local Shared Tax.** Very similar to Japan's Local Allocation Tax, Local Shared Taxes in Korea is divided into Ordinary Local Shared Taxes and Special Local Shared Taxes. Ordinary Local Shared Taxes, which comprise 10/11 of the total, are distributed on the basis of the pre-determined equalization formula.

**14** The author would like to thank Dr. Jhungsoo Park of Korean Tax Istitute for providing me with the most recent materials. Parts of this section draw from Kim (1994).

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