(EDITORIAL from the Korea Herald on Sept. 25)

YONHAP - In revealing its proposal to revise the threshold for the controversial real-estate holding tax system, the government said it was attempting to boost the domestic construction industry and resuscitate the overall economy.

That having been said, most Koreans would view the proposal as essentially
abandoning the comprehensive real-estate holding tax instituted in 2005 by the
Roh Moo-hyun administration.
Roh argued that the comprehensive real-estate holding tax would curb real-estate
speculation. What the system -- which taxes those who own expensive homes -- also
did was to redistribute wealth. This was in line with the Roh administration's
progressive agenda.
If the system is revised as proposed, homes priced at 900 million won or more
will be subject to the comprehensive real-estate holding tax. At the moment,
owners of homes priced at 600 million won or more are charged. The tax rate would
also be substantially lowered -- from the current 1 percent to 3 percent, to 0.5
percent to 1 percent.
When the new tax system was introduced, conservatives charged that it was double
taxation that penalized the richest 2 percent of the population.
When the conservative Lee Myung-bak administration came into power, a tax
revision was expected. Finance Minister Kang Man-soo went so far as to say
Tuesday that the tax should be abolished altogether over time. "The tax has never
been compatible with taxation principles," he said.
When the revision is made, more than 200,000 households will be exempted from the
comprehensive real-estate holding tax, representing a tax cut of 2.23 trillion by
2010.
However, the amount saved in taxes also represents the amount of tax revenue lost
by the government. It is unclear how the government plans to handle this loss in
revenue or how property tax may be adjusted to reflect the change.
In light of the lack of a proposal to change the property tax system, many people
feel that the revision of comprehensive real-estate property tax will benefit the
wealthy at the expensive of the less affluent.
The regional governments that were the beneficiaries of the comprehensive
real-estate holding tax revenues understandably object to the revision.
Opposition parties charge that the policy is aimed at the country's privileged.
They say it would undermine market stability and increase the gap between the
rich and the poor.
Even the ruling Grand National Party is not fully behind the proposal. GNP floor
leader Hong Joon-pyo said that the party has not yet entirely agreed to the
administration's plan, hinting at a possible adjustment. With the popular
sentiment against scrapping the comprehensive real-estate holding tax, simply
agreeing with the government may be too politically risky for the GNP.
Given the circumstances, the government proposal on the comprehensive real-estate
holding tax revision will be hotly debated. The proposal should be closely
scrutinized for all its ramifications.