Allowing Corporate Donations: Will It Solve the Issues of the Hometown Love Donation System? [New Administration Policy Agenda]

Lee Administration Pledges System Reform
Hopes for Expanded Local Finances
Controversy Over "Donation Pressure" on Corporations

Yonhap News Agency

As the Lee Jaemyung administration considers reforming the Hometown Love Donation System as part of its national balanced development agenda, a comprehensive overhaul of the system is being signaled. In particular, if the plan to allow corporate donations?an item included in the presidential campaign pledges?is implemented, the scope of the system will expand. However, there are simultaneous concerns that this could devolve into a form of "quasi-compulsory donation pressure" on businesses. Securing voluntariness, transparency, and fairness is emerging as a key issue.

According to the government and local governments on June 13, President Lee Jaemyung presented the improvement of the Hometown Love Donation System as a major campaign pledge during the presidential election. The core of the proposal is to allow corporate participation in the system. Specifically, corporations would be permitted to donate up to 20 million won per year to a local government, with all donations earmarked for resident participatory budgeting projects in that locality. The plan also includes making the expenditure details and outcomes publicly available to ensure transparency in the management of donations.

The Hometown Love Donation System has been in effect since 2023. Individuals can donate up to 5 million won per year to a local government other than their place of residence, and donors receive tax credits and local specialty products as rewards. The donations are used for projects that enhance residents' welfare in the local governments.

Although the system initially drew attention as a countermeasure to regional extinction, several structural limitations have become apparent in its second year of implementation. The most notable issue is the concentration of donations among certain local governments. As of 2024, the top 30 local governments raised 21 times more in donations than the bottom 30. Donations have been heavily concentrated in areas with popular tourist destinations or local specialties, while less affluent regions have struggled to attract donations. There have also been cases where some local governments undermined the purpose of the system by offering imported agricultural products as rewards.

In this context, allowing corporate donations is drawing attention as a potential fiscal supplement by broadening the donor base. However, there are also significant concerns that this could undermine the voluntariness and fairness of donations.

In particular, from the perspective of businesses, repeated "subtle requests" from local politicians or governments could make donations feel less voluntary and more like obligatory contributions. If a perception arises during negotiations over regional development projects, permits, or agreements that "donations are a prerequisite," the overall fairness of the system could be compromised.

An expert in local administration, who requested anonymity, stated, "Even if local governments do not make direct requests, small and medium-sized businesses in the region may feel that 'not donating could attract disapproval,' undermining their autonomy. If such perceptions spread, the Hometown Love Donation System could be misunderstood as a political transaction, much like the past controversy over 'regional development funds.'"

In fact, there have been allegations in the past that some local governments encouraged specific companies to make donations in the form of mutual growth funds or demanded similar contributions as a condition. For example, in April, Geoje City proposed that Samsung Heavy Industries and Hanwha Ocean jointly contribute 10 billion won each annually for five years?a total of 150 billion won?to establish a regional mutual growth fund, which led to the mayor being reported by a civic group.

To prevent such side effects, some argue that institutional measures should be implemented, such as prohibiting solicitation of donations, making donation records publicly accessible in real time, and introducing fundraising caps for each local government to prevent excessive concentration of donations.

Meanwhile, the plan to link the system with participatory budgeting, also proposed in the Lee Jaemyung administration's pledge, is being identified as another challenge. While the structure of guaranteeing citizen participation in the budget decision process is positive in principle, there are concerns that, in practice, it could become merely procedural in basic local governments where institutionalized participation is lacking or capacity is insufficient.

Additionally, there is an issue that the scope of donation usage is excessively narrow. Current laws restrict the use of donations to limited areas such as welfare and care, leading to complaints from local governments that it is difficult to use the funds for creative projects or infrastructure tailored to local characteristics. In reality, many basic local governments are using donations uniformly for quarantine supplies, child care, and support for vulnerable groups.

A government official said, "No specific legislative procedures or implementation schedule have been established yet," adding, "Once discussions begin, a comprehensive review of the system will include expanding tax credit benefits, diversifying donation methods, and making the use of donations more flexible."