[22-2(A) KCCR 775, 2007Hun-Ra4, October 28, 2010]

In this case, the Constitutional Court held that Article 6-2 of the Local Tax Act which makes property tax of a Gu (District) be the Special Metropolitan City and Gu tax, thereby the property tax is jointly imposed by both the Special Metropolitan City(50/100) and autonomous Gus (50/100) under the jurisdiction, and Article 6-3 of the Local Tax Act, which stipulates that all of the property tax revenue belonging to the Special Metropolitan City shall be allotted to the autonomous Gus under jurisdiction, does not infringe on the plaintiffs' local autonomy right guaranteed by the Constitution.

Background of the Case

On July 3, 2007, respondent (National Assembly), in order to cure the serious financial imbalance among Gu in the Special Metropolitan City, passed the revised bill to the Local Tax Act for newly enacting Article 6-2 and Article 6-3 (hereinafter, the Instant Provisions) which prescribe that, as for Gu within jurisdiction of the Special Metropolitan City, the property tax which used to be "Gu tax" shall be the "Special Metropolitan City and Gu tax," and the Mayor of Special Metropolitan City shall grant all of the property tax belonging to the Special Metropolitan City to the autonomous Gus under jurisdiction. The revised bill was promulgated on July 20, 2007 and took effect on January 1, 2008.

Plaintiffs filed this competence dispute suit to the Constitutional Court, arguing that, due to the respondent's act of enacting the Instant Provisions, more than 50% of the plaintiffs' property tax revenue goes to the Special Metropolitan City; the plaintiffs' tax revenues decrease; and Gus could be subordinated to the Special Metropolitan City, and therefore, the Instant Provisions infringe upon the plaintiffs' local autonomy rights or the core of their right to financial autonomy.

Provisions at Issue

Local Tax Act (revised by Act No. 8540, July 20, 2007)

Article 6-2 (Joint Imposition of Property Tax within Jurisdiction of Special Metropolitan City)

①As for a Gu within the jurisdiction of Special Metropolitan City, property tax (excluding property tax on ships and aircrafts) shall be the "property tax which is the Special Metropolitan City/Gu tax" notwithstanding Article 6.

②The amount of property tax of the Special Metropolitan City/Gu from among property tax which is the Special Metropolitan City/Gu tax pursuant to Paragraph 1 shall be 50/100 of the property tax amount (referring to the tax amount obtained by applying the standard tax rate pursuant to Article 188(1)) obtained by calculating pursuant to Section 2 of Chapter III, respectively. In such cases, the property tax of the Special Metropolitan City tax shall be deemed Special Metropolitan City tax which is an ordinary tax provided for in Article 6(1) and the property tax of Gu shall be deemed as Gu tax which is an ordinary tax in Article 6(3).

Article 6-3 (Granting Property Tax of Special Metropolitan City)

①The Mayor of Special Metropolitan City shall grant all of the property tax amount of the Special Metropolitan City pursuant to Article 6-2 to the autonomous Gus under jurisdiction.

② Necessary matters, such as the standard, method, etc. of granting property tax of the Special Metropolitan City pursuant to paragraph (1) shall be stipulated by the Municipal Ordinance of Special Metropolitan City, taking consideration of the local tax revenue of autonomous Gus, etc.: Provided, that, where the granting standard is not determined, it shall be equitably distributed among the autonomous Gus.

③The property tax granted by the Special Metropolitan City pursuant to paragraphs (1) and (2) shall be deemed tax revenue of property tax of the autonomous Gu concerned.

Summary of the Decision

1. Issue of this case

The main issue of this case is whether the respondent's act of enacting the Instant Provisions infringes the plaintiffs' local autonomy endowed by the Constitution.

2. Whether the plaintiffs' local autonomy right is infringed

A. Local autonomy rights under the Constitution

Article 117 Section 1, by stipulating that "local governments shall deal with administrative matters pertaining to the welfare of local residents, manage properties, and may enact provisions relating to local autonomy within the limits of Acts and subordinate statutes," provides institutional guarantee of local autonomy. Based on this, local governments are guaranteed to have rights to local autonomy with which each local government can autonomously execute administrative matters under its jurisdiction within the limits of Acts and subordinate statutes, and those rights include a right to autonomous legislation, a right to organizational autonomy, a right to autonomous personnel management, a right to financial autonomy, etc. Among these rights, the right to financial autonomy means a local government's rights to autonomously manage its revenue and expenditure not directed by the State within the limits of Acts and subordinate statutes.

Under the right to financial autonomy, there is a right to autonomous revenue, meaning that a local government has a right to autonomously decide its revenue policy from the possible source of revenue under its responsibility, including a right to impose and levy public charges such as local tax and allotted charges. There is also a right to autonomous expense, meaning that a local government can autonomously use its financial means to execute administrative matters within its budget under its own responsibility. There financial autonomy right of local governments, however, is not an absolute right but formed and restricted by Acts such as the Local Tax Act, the Local finance Act, the Local Public Enterprises Act, etc.

B. Standard of review as to whether the rights to local autonomy

are infringed under the Constitution

As reviewed before, since the local autonomy rights guaranteed by Article 117 Section 1 of the Constitution are not absolute rights but formed by Acts and subordinate statutes, legislators may restrict local government's autonomy rights while enacting the matters pertaining to local autonomy. Although it is possible to restrict the local autonomy rights, however, the restriction should not infringe on the essence of the rights such as denying the existence of local government itself or annihilating the local government's rights.

Therefore, in reviewing infringement of the local government's autonomy rights by the National Assembly's legislation, it is sufficient to review whether the essential parts of the local autonomy rights are infringed and there seems to be no need to apply the rule against excessive restriction or the principle of equality applicable to review infringement of fundamental rights.

C. Whether the act of enacting the Instant Provisions infringes the plaintiffs' local autonomy under the Constitution

(1)Whether the property tax should be reverted to the elementary local governments

As reviewed before, since the local government's right to financial autonomy under Article 117 Section 1 of the Constitution is guaranteed within the scope that Acts stipulate, the simple fact that a local government has the right to financial autonomy does not necessarily give the local government the right to have guaranteed source of income such as a specific tax. Rather, such a right is formed only after related provisions of Acts are enacted. And the issue regarding which types of tax should be included to which types of governmental institutions is a matter to be decided by a national policy in consideration of the basis of a specific tax, efficiency in levying the tax, and financial conditions of the institutions where the tax may possibly be reverted, and there is no constitutional or logical basis to consider that a certain type of tax should be a state tax or a local tax.

Therefore, legislators have the authority to decide what kinds of tax

should be imposed on the people, whether the tax should be a state tax or a local tax, and whether it is a regional local government or an elementary local government to which a local tax should be reverted, and unless it is unreasonably and excessively arbitrary, the decision by them should be respected.

Property tax, which used to be a Gu tax, was changed into a joint tax of the Special Metropolitan City and Gus by the Instant Provisions and since it is hard to conclude that there is a constitutional or logical basis that the property tax should belong to elementary local governments, the aforementioned change, which turned a tax that used belong only to the elementary local government into one that is shared by elementary and regional local governments, does not go beyond the legislator's authority.

Therefore, although the Instant Provisions place restrictions on the plaintiffs' right to financial autonomy by decreasing their revenue, unless such restriction is so excessive that the plaintiffs' right to financial autonomy becomes nominal, thereby infringing on the essential part of the local government's right to financial autonomy, the respondent's act of legislating the Instant Provisions can be considered legitimate. As such, in the following part, we review the issue as to whether the core of the plaintiffs' right to financial autonomy is infringed by the Instant Provisions.

(2) Degree of decrease in the plaintiffs' revenue from property tax

The Instant Provisions result in 50% decrease in Gu's property tax revenue, but since the property tax amount of the Special Metropolitan City shall be allocated to the autonomous Gus under jurisdiction pursuant to the Instant Provisions and the Seoul Metropolitan City Ordinance, the actual decrease in the plaintiffs' property tax revenue will be less than 50%.

According to the data submitted by the plaintiffs, the actual rates of decrease in the plaintiffs' property tax revenue in 2008 from 2007, taking the revenue allocated by Seoul Metropolitan City to each autonomous Gu, are, for example, 9.8% for Jung-Gu, 28.8% for Seocho-Gu and 31.6% for Gangnam-Gu. And, after taking the amount of money provided by the Seoul Special Metropolitan City for compensation of the decrease in Gu's property tax revenue (in 2008,

60%, in 2009, 40%, and in 2010, 20%), the rates of decrease in the plaintiffs' property tax revenue become even lower, such as 3.9% for Jung-Gu, 11.5% for Seocho-Gu and 12.7% for Gangnam-Gu. Meanwhile, in elementary local governments, the rates of fulfilling the standard for local financial demand are far above 100%, such as 210.8% for Jung-Gu, 124.25% for Seocho-Gu and 197.9% for Gangnam-Gu, and therefore, it seems that despite the decrease in property tax revenue by the Instant Provisions, the plaintiffs can maintain the rates of fulfilling the standard for local financial demand over 100%.

Considering all the circumstances, although the Instant Provisions place some restrictions on the plaintiffs' right to financial autonomy by decreasing their property tax revenue, the restrictions cannot be regarded as excessive enough to make the plaintiffs' right to financial autonomy only nominal.

(3) Sub-Conclusion

Therefore, the respondent's act of enacting the Instant Provision cannot be considered as infringing on the core of the plaintiffs' right to financial autonomy guaranteed by the Constitution.

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