Definition
In Korea, national taxes and local taxes are two categories that sort taxes by who collects them and where the money goes. A tax that the central government collects to run the whole country is a national tax. A tax that a local government collects for the daily convenience of people in your neighborhood is a local tax.
School council fees versus class fees
It's easy to understand if you think about money collected at school.
There's the "school-wide student council fee," which every student pays equally and which goes to things like the school festival or library upgrades. And there's the "class fund," which your classmates pool to buy cleaning supplies or class snacks. Taxes are split by the same principle.
Taxes that the central government (the nation) collects and spends for all of the Republic of Korea are called "national taxes." They pay for big, nationwide jobs like national defense, diplomacy with other countries, and building highways and railways that connect the whole country.
On the other hand, taxes collected by local governments, such as the city, county, or district offices where we live, are called "local taxes." They go to things tied directly to residents' daily lives, like neighborhood garbage collection, streetlights in alleys, park upkeep, and running the community service center.
What are some national taxes and local taxes?
The taxes we run into in daily life also have different collectors depending on their names.
The income tax taken out when you get paid and the value-added tax (VAT) included in the price when you buy things are classic national taxes. The corporate tax on a company's earnings and the comprehensive real estate holding tax paid on high-value property are national taxes too. These are managed by the National Tax Service and its local tax offices, which are national government agencies.
On the other hand, the acquisition tax you pay when buying a house or land, and the property tax and automobile tax you pay every year for owning a home or car, are local taxes. The resident tax, a small amount charged each year to heads of households and others who live in the area, is also a typical local tax. Local taxes are collected not by the national government but by the tax departments of city, county, and district offices.
The payment windows differ, too. National taxes are paid through Hometax, the national online payment system. Local taxes use separate systems called WETAX or ETAX (for Seoul).
To be more precise: why collect taxes separately at all?
To be more precise, in many regions local taxes alone aren't enough to run the community.
Big cities with large populations and many big companies collect plenty of local tax. But rural and fishing areas with few people fall far short. If every area had to get by only on the local taxes it collected, you'd get a problem of inequality between regions, where road quality and welfare benefits differ widely depending on where you live.
So the central government takes part of the national taxes collected evenly from across the country and shares it with local governments in tougher financial shape. This is called the "local allocation tax." Thanks to it, even areas with low local tax revenue can keep basic administration and welfare services running without trouble.
In the end, national and local taxes aren't just two separate ways of collecting money. They work together like gears that help each other, for the balanced development of the whole country.
Common misconceptions
All taxes on real estate are local taxes paid to local governments.
The "property tax" you pay for owning a house or land is a local tax, but the "comprehensive real estate holding tax," charged on high-value property above a set threshold, is a national tax collected by the state.
You can look up and pay every tax in one place, Hometax.
National taxes like income tax and VAT are handled on the National Tax Service's Hometax, but local taxes like acquisition tax and property tax must be paid through WETAX (ETAX in Seoul) or the local district office.
Where you meet it
When you buy snacks at a convenience store and get a receipt, the 10% VAT printed on it is a national tax. But part of that amount is split off as the local consumption tax, a local tax, and goes to local governments.
The automobile tax bill that city or district offices send every year to car owners is a local tax.
In one sentence
National taxes are collected by the central government for the whole country's needs (defense, diplomacy, and so on). Local taxes are collected by local governments for the neighborhood living environment (parks, cleaning, and so on).