Biz community hail Constitutional Court ruling on real estate tax

SEOUL, Nov. 13 (Yonhap) -- South Korea's major business bodies on Thursday welcomed the Constitutional Court's ruling against a controversial law levying heavier taxes on high-end home owners.

The Korea Chamber of Commerce and Industry (KCCI) and the Federation of Korean
Industries (FKI) said in a press release that the ruling against the tax "is
expected to help facilitate real estate transactions that have frozen up in
recent months."
Earlier in the day, the Constitutional Court ruled that the law is partly
unconstitutional, vindicating President Lee Myung-bak's proposed tax cuts to
boost the economy. The ruling was the first judicial interpretation of the
comprehensive real estate holding tax levied on South Korea's top 2 percent.
The ruling, which will reduce taxes, could lead to a pickup in consumption that
is vital to economic recovery, the two groups said.
South Korea, Asian fourth largest economy is expected to post mid-4 percent
growth this year, with the number falling to the lower 3 percent range in some
estimates.
The umbrella groups added that while private property owners may benefit, it is
imperative for the government to now look into the real estate holding tax levied
on corporations that is adversely affecting business activities.
"We respect the decision made by the court and hope to see speedy follow-up
legislative process to correct problems in the tax system that conflict with the
Constitution," a KCCI source said.
The source at the country's largest business organization then said that slashing
of the tax burden related to the property holding tax could increase disposable
income levels and support efforts to revive consumer spending. The latest move
could result in tax refunds totaling 500 billion won.
Gains in spending can help production that can lead to more investments and jobs.
Details on the impact have not been fully assessed but 160,000 households may be
eligible for refunds for past payments made, while if legislative process
forwarded by the Lee Myung-bak administration takes effect, the number of
households that have to pay the taxes in the future could drop from 387,000 to
161,000.
The FKI echoed such views and called on the government to implement measures to
readjust high real estate holding taxes that are still in place for companies.
The group representing South Korea's largest family-owned conglomerates said that
the ruling corrected the unfair tax, that was attacked for being unconstitutional
at the outset.
It said that reduction in taxes could help the construction sector, which makes
up 18 percent of the gross domestic income.
An FKI official then said that while policymakers are likely to take steps to
lower the tax burden for individuals, they should at the same time push for
similar measures for companies.
"In terms of total numbers, companies that paid the real estate holding tax
accounted for a mere 3.1 percent of the total, although this ballooned to 55.3
percent in terms of sums paid in 2007, and 43 percent set for this year," the
expert who declined to be identified said.
He pointed out that companies in the course of their operations had no choice but
to hold on to all sort of real estate that are used for offices and factories as
well as land set aside for future investments.
"If current tax levels are maintained corporate competitiveness will suffer," the
expert said.