[6 Months of Hometown Love Donation System] Average 53 Million KRW Raised per Local Government... Need for Improvements Such as Allowing Corporations

Imsil-gun's Unique Return Gift Ranked No.1
Urgent Need to Improve Regulations Blocking Donations
Annual Donation Limit Set at 5 Million Won
Corporate Donations Allowed, Providing Opportunities for Regional Contribution

The Hometown Love Donation System, implemented earlier this year, is now entering its sixth month. This system helps revive declining local areas through donations, significantly contributing to the expansion of local government finances and the revitalization of regional economies. However, as it is the first year of the system's introduction, many citizens are still unfamiliar with the Hometown Love Donation System, and there are still many aspects to improve, such as allowing corporate donations.

Donations to Local Governments Other Than Registered Address... Used to Enhance Welfare of Local Residents

The Hometown Love Donation System has been in effect since January 1 of this year, based on the 'Act on Hometown Love Donations,' its enforcement decree, and local government ordinances.

This system allows citizens to donate to local governments other than their registered residential address. The donations are used as local government revenue and are allocated to support socially vulnerable groups, youth protection and development, promotion of culture, arts, and health, and revitalization of local communities, thereby enhancing the welfare of local residents. Donors receive tax credit benefits along with thank-you gifts from the respective local governments.

As the Hometown Love Donation System reaches its half-year mark, results are gradually emerging. According to data compiled by Lee Man-hee, a member of the People Power Party, from 140 local governments out of 228 nationwide (excluding 88 that refused to disclose fundraising results), each local government raised an average of 53 million KRW from January to March. This translates to an average donation of 140,000 KRW per person.

Looking at the top 30 local governments by fundraising amount, the average number of donations was 296.3, with an average fundraising amount of 141 million KRW. The average donation per person was 196,000 KRW, which is 56,000 KRW higher than the overall average.

The local government with the highest fundraising amount was Imsil-gun in Jeonbuk Province, collecting a total of 941 donations amounting to 315 million KRW. Following were Jeju City, Yecheon-gun in Gyeongbuk Province, Gimje City in Jeonbuk, Uiseong-gun in Gyeongbuk, and Gochang and Muju-gun in Jeonbuk, ranking high in performance.

Local governments in the top ranks are attracting donors' attention with distinctive thank-you gifts. Imsil-gun emphasizes its specialty product, 'Imsil Cheese.' Particularly popular is the cheese gift set priced at 30,000 KRW, which is the maximum value of thank-you gifts for a 100,000 KRW donation eligible for tax credit. Jeju offers 30 types of thank-you gifts, including seafood, Samdasoo mineral water, and apple mangoes. Uiseong-gun also offers local specialties such as 'Uiseong Garlic' and 'Uiseong Jin Rice,' which was used as a presidential New Year's gift.

Inspired by Japan... Japan's System Grows Over 100 Times in 13 Years

The Hometown Love Donation System was inspired by Japan's 'Furusato Nozei' (Hometown Tax Payment) system. Facing severe regional extinction due to low birth rates and aging population, Japan introduced the Furusato Nozei in 2008 to transfer tax revenue from large cities to local areas to reduce tax revenue disparities.

Japan's Furusato Nozei allows taxpayers to make tax payments (donations) to their hometown or any desired local government, with tax credit benefits applied to amounts exceeding 2,000 yen (approximately 20,000 KRW). However, it initially received little attention. From 2013, local governments began offering thank-you gifts, and from 2014, the system entered a period of active growth. After 13 years, the tax credit scale increased more than 100 times, marking a great success.

The biggest reason for the success of Japan's Furusato Nozei is the thank-you gifts. According to Japan's Ministry of Internal Affairs and Communications, 732 local governments, accounting for 41% of all, cited 'abundant thank-you gifts' as the key factor for system activation.

System improvements were also thoroughly implemented. In 2015, the Japanese government raised the resident tax credit limit from 10% to 20%, and introduced the 'One-Stop Exception System,' which automatically applies tax credits without separate application procedures if donations are made to up to five local governments. To encourage corporate participation, the 'Local Revitalization Support Tax System' was introduced in 2016, opening the door for companies. Corporations donating to local projects related to job creation or low birth rate countermeasures can receive double the usual tax credit benefits on corporate tax and resident tax.

Still a Long Way to Go: Corporate Donations and Donation Limits Need Adjustment

Although the system has shown positive effects and received support in its early stages, the Hometown Love Donation System still has a long way to go, especially in terms of system and operational improvements.

According to the National Assembly's legislative information system, nine bills to amend the 'Hometown Love Donation Act' have been proposed this year alone.

The Hometown Love Donation System allows individuals to donate to local governments other than their registered address, and local governments use these funds to enhance residents' welfare. Donations up to 100,000 KRW are fully tax-deductible, and amounts exceeding 100,000 KRW receive a 16.5% deduction. Donors receive thank-you gifts worth up to 30% of the donation amount. However, corporations are currently not allowed to donate, and the annual donation limit per individual is capped at 5 million KRW.

In response, Jeon Bong-min of the People Power Party has proposed an amendment to allow corporate donations and raise the annual donation limit per donor to 10 million KRW. Furthermore, Kim Young-joo of the Democratic Party has proposed an amendment to allow corporations, which can donate larger amounts than individuals, to participate without applying the donation limit.

The repeated proposals in the National Assembly reflect the awareness that the prohibition of corporate participation and the donation limit are the biggest obstacles to activating the Hometown Love Donation System.

Hwang Yi-kyung, a researcher at the Korea Legislation Research Institute, pointed out, "Excessive regulations on the Hometown Love Donation System are discouraging donations. The system's fundamental purpose is to supplement poor local finances, and 5 million KRW is too low. Corporate donations should be allowed to open opportunities for companies to contribute to local communities."

Researcher Hwang also emphasized the urgent need for changing public perception of the system. He said, "Currently, the main promotional message is 'Donate 100,000 KRW and get 130,000 KRW in benefits,' but this can distort the system's purpose. It is important to actively promote the system's intent and content, such as 'expanding local finances through regional economic revitalization, overcoming the crisis of local extinction, and ultimately achieving national balanced development,' so that the public recognizes its necessity."

Japan, the originator of the Furusato Nozei system implemented since 2008, has also been gradually revising and supplementing the system. As excessive competition over thank-you gifts arose among local governments to attract more donations, in 2019, the thank-you gift ratio was limited to 30%, and the items were restricted to local specialties. Earlier, in 2012, the income and resident tax deduction threshold was lowered from 5,000 yen to 2,000 yen, and in 2016, corporate participation in Furusato Nozei was introduced. Unlike Korea's system, Furusato Nozei has no limits on the number of local governments to which donations can be made, the number of donations, or the donation amount, only a deduction limit applies. As a result, the donation amount grew from about 8.1 billion yen in 2008, the first year of implementation, to approximately 830.2 billion yen in 2021.

The Korean government is also working on improvements to the Hometown Love Donation System. In April this year, the Ministry of the Interior and Safety revised the enforcement decree to allow overseas Koreans with foreign nationality to participate. Once the decree is amended, overseas Koreans who have registered their residence in Korea will be able to donate to regions other than their registered area.

An official from the Ministry of the Interior and Safety said, "Since the Hometown Love Donation System was implemented for the first time this year, we plan to improve the system based on the results of the first half of the year. We will strive to successfully establish the system to enhance regional vitality and contribute to balanced development."