Constitutional Court to rule on controversial real estate tax

By Kim Hyun
SEOUL, Nov. 13 (Yonhap) -- The Constitutional Court will rule Thursday on whether
a law that levies heavier taxes on owners of high-end homes is constitutional in
a landmark case that carries heavy political weight.

The ruling, set for 2 p.m., will be the first judiciary interpretation of the
comprehensive real estate holding tax, which has caused a sharp divide along
socioeconomic and party lines.
The decision, whatever it may be, is expected to reverberate throughout President
Lee Myung-bak's administration. Lee is strongly opposed to the legislation, which
was implemented under the government of his liberal predecessor, Roh Moo-hyun, in
2005.
Seven groups of high-end homeowners, mostly from an affluent district in southern
Seoul, have filed constitutional complaints since 2006, claiming the tax is
unfair and overlaps with other property taxes. They claim it "violates one's
property rights and the principles of market economy and private ownership,"
according to documents released by the Constitutional Court.
Roh levied the tax on South Korea's top 2 percent under the principle of
wealth-distribution, claiming it would help the lower classes and cash-strapped
provincial governments.
In a warning to conservatives during his presidency, Roh once said: "I will make
the real-estate holding law more difficult than the Constitution to amend."
The surtax imposes a 1-3 percent tax on those owning property worth 600 million
won (US$430,137) or more.
Roh's pledge did not hold long. The Finance Ministry, which had backed the tax
under Roh, changed its position and announced in September that it will raise the
minimum tax base. The bar is set to be raised to 900 million won and the tax rate
will be lowered to 0.5-1 percent, it said.
That step will halve the number of households subject to the surtax to 161,000
from the current 387,000.
Finance Minister Kang Man-soo, seen by many as an emblem of Korea's wealthy
elite, once compared the ownership tax law to regulations imposed in Germany
under Adolf Hitler, who Kang said "enacted laws with the support of majority."
Kang is under a parliamentary investigation for commenting that his junior
officials had contacted court officials ahead of Thursday's ruling, suggesting he
may have tried to influenced their decision.
Civic groups warned of massive street demonstrations should the government
proceed with its plan to raise the tax bracket or if the court repeals the law.
Some 50 leading organizations, including Lawyers for A Democratic Society and
Civic Solidarity for Participatory Democracy, are campaigning for the suspension
of the government's tax reform plan and the revival of candlelight protests, said
Lee Sang-min, a civic activist.
President Lee's approval rating fell to nearly 10 percent in the summer after a
decision to resume U.S. beef imports. The decision prompted massive candlelight
rallies that rocked the capital for months.
The president's ratings have recovered somewhat, hitting 25.1 percent this week,
according to the Korea Society Opinion Institute, a private survey center.
hkim@yna.co.kr
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