(EDITORIAL from the Korea Times on Nov. 14)

Fate of `Punitive??? Tax: Court says anti-speculation tax is partly unconstitutional

Thursday's ruling on the anti-speculation tax scheme by the Constitutional Court
is likely to put the tax in name only. The court decided to keep the law
governing the tax, turning down petitioners' key claim that the tax burden was
too heavy. It also rejected other claims that the tax was designed to target
unrealized profits or erode the value of affected properties. Ostensibly, the
court was in favor of the scheme. But the fate of the tax is uncertain because
the court ruled that the law was partly unconstitutional.
Noteworthy is that the court stated the law contravenes the Constitution as it
levies the ``punitive" tax on a consolidated family basis which discriminates
married couples against unwed individuals. Through this ruling the court
reaffirmed that taxes ??? both on incomes and properties ??? should be levied
separately on each member of a married couple. In 2002, the court ruled that the
consolidated family income tax law was unconstitutional.
Also striking is that the court said that imposing the anti-speculation tax on
owners of only one home is not in line with the Constitution. It stated that the
single homeowner taxation violates individuals' right to property ownership. The
two important elements of the ruling have virtually tolled a death knell to the
anti-speculation tax law. It seems that the court has reached the verdict in
order to avoid a chaos that might have been caused by a possible abolition of the
law.
Taxpayers residing in the rich residential districts in southern Seoul rushed to
tax offices in a bid to submit paperwork for tax refunds last month even before
the court's ruling. However, the tax authorities are now required to refund taxes
imposed on married couples, of which both husbands and wives own their own homes.
Consequently, the ruling is aimed at minimizing its ripple effect on the taxation
system as well as helping most owners of single homes ease their tax burden.
Now, is time for the nation to put an end to heated debates over the tax, which
was introduced by the Roh Moo-hyun administration in 2005 to fight rampant
speculation on homes and land. Stressing the redistribution of wealth, the
liberal Roh government claimed that the tax would also benefit the lower classes,
while forcing multiple homeowners to dispose of their houses to avoid the heavier
burden. A 1-3 percent tax is currently imposed on landlords owning homes worth
600 million won ($430,000) or higher.
Following the court ruling, the Lee Myung-bak administration should take
follow-up measures to revise the tax code and retrospectively refund taxes that
were unduly levied. The Ministry of Strategy and Finance has already announced
its plan to raise the minimum tax base from 600 million won to 900 million won.
It has also pledged to lower the tax rate to 0.5-1 percent. Thus, the number of
households subject to the punitive tax is likely to be halved to 161,000 from the
present 387,000.
Liberal opposition parties, including the Democratic Party and the Democratic
Labor Party, ought to fully respect the court verdict. It is not desirable for
them to take a political offensive against the government and the governing Grand
National Party by opposing any changes to the tax scheme. More important is that
both ruling and opposition camps should show their bipartisanship on how to
prevent recurrence of property speculation and reduce the tax burden for both the
rich and the poor, especially during a global financial crisis and an economic
slowdown.
(END)