[Seoul, Now] Local Love Gift Certificates Moving Backward Despite High Popularity

Sold Out Streak Welcomed by Small Business Owners
But Both Issuance and Discount Rates Continue to Decline
Government Support Cut, Seoul City Also Reduces Funding
Good Policies Should Be Maintained Regardless of Administration Changes

Local love gift certificates have already proven their effectiveness by allowing residents to make everyday purchases at discounted prices and boosting sales for local small business owners. The key to their popularity lies in the ability to buy gift certificates at a discount and receive income tax deductions during year-end tax settlements.

Their impact was confirmed in many places during the COVID-19 pandemic. Thanks to effective promotion, the turnover rate in Seoul reached as high as 90% within eight months. Compared to other consumption stimulation or support policies, their simple structure results in almost no cost leakage from maintenance and management.

Nevertheless, in Seoul, the amount issued and the discount rate given to residents have been decreasing every year since peaking in 2022. The policy direction related to issuing local love gift certificates is going against the policy’s popularity, effectiveness, and positive functions.

Several district mayors say, “This is a good policy praised by the public and small business owners, and its effectiveness has been verified, yet instead of supporting it, government policies are actually moving in the opposite direction.”

The basis for this criticism is as follows. The total amount of gift certificates issued by Seoul City and its autonomous districts was 551 billion KRW in 2020, surpassed 1 trillion KRW with 1.1633 trillion KRW in 2021 and 1.2104 trillion KRW in 2022, but then decreased to 935.4 billion KRW last year and is expected to be 882.9 billion KRW this year.

The decrease is not due to improved economic conditions or circumstances compared to the COVID-19 period. Due to high inflation and high interest rates causing consumption contraction, the closure rate of dining establishments recently has exceeded the levels seen during the height of the COVID-19 impact. According to Seoul City’s commercial district analysis service, the number of dining establishment closures in the first quarter over the past five years was 6,258 in 2020, 4,108 in 2021, 3,911 in 2022, then increased again to 5,754 in 2023 and 5,922 this year. The statistics show that the situation is serious.

The reduction in the amount of gift certificates issued and the halving of the discount rate are due to significant budget cuts by the government and Seoul City. In 2022, when a 10% discount rate was applied to issuing gift certificates, Seoul City supported 60% of the total discount rate, while the government and autonomous districts each bore 20%. However, from last year, the government eliminated its support. The discount rate dropped to 7%, and Seoul City and the autonomous districts supported the budget at a ratio of 57 to 43. This year, Seoul City cut its budget support by half compared to the previous year, and the discount rate was lowered again to 5%.

This year’s amount of gift certificates issued decreased by 27% compared to two years ago, and the discount rate was halved from 10% to 5%. The autonomous districts’ budget burden for issuing gift certificates remained the same, but the government and Seoul City’s budget cuts led to this outcome. The autonomous districts also point out problems with Seoul City’s issuance of the Seoul Love Gift Certificate, a metropolitan-level local love gift certificate. While gift certificates issued by each autonomous district must be used only within their respective areas, the Seoul Love Gift Certificate issued by Seoul City can be used throughout the entire city, causing money to concentrate only in strong commercial areas such as Myeongdong, Hongdae, and Seongsu.

District mayors actively inform Seoul City of the realities of the autonomous districts and grassroots public sentiment through the district mayor council and other channels, demanding continuous communication, but persuasion is reportedly not easy.

The situation does not seem likely to change much in the second half of this year or next year. Since its inauguration, the Yoon Suk-yeol administration has defined the local love gift certificate project as a local government task and has maintained a policy of completely cutting national government support. Despite its many positive functions, vigilance is needed to prevent this policy from quietly shrinking or regressing whenever the administration changes, following the precedent of such cases.