The government and ruling Democratic Party(DP) have finalized a second-phase plan on fiscal decentralization that calls for increasing municipal finances by two trillion won.

Half of the amount will be funded by raising provincial consumption tax rates from 21 to 25-point-three percent, while the remaining amount will come from a related fund.  

The ruling party, government and the presidential office came to agreement during a Wednesday plenary meeting of the DP's special committee dedicated to fiscal decentralization, according to committee chair Kim Young-bae.

The DP initially sought to raise the provincial consumption tax by seven percentage points but as the Finance Ministry did not agree, reached a compromise of a four-point-three-percentage-point increase.

The ruling party will draw up a bill based on the decisions reached Wednesday, aiming to pass the legislation as early as September.