Ruling party to keep minimum real estate tax base

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By Shin Hae-in
SEOUL, Nov. 17 (Yonhap) -- The ruling party has decided to drop its bid to raise
the minimum value of homes subject to a real estate tax in an effort to calm the
controversy surrounding the progressive tax system, officials said Monday.
The decision by the Grand National Party (GNP) follows a recent Constitutional
Court ruling that partly struck down the tax on high-end homes.
The real estate tax, which applies to homes valued at 600 million won
(US$427,000) and up, was first introduced in 2005 under the liberal Roh Moo-hyun
administration to prevent real estate speculation. The incumbent government has
long attempted to revamp the tax, seeing it as a punitive measure that goes
against free market principles.
The top tribunal's ruling paved the way for the government to refund a
significant portion of the special tax and gave momentum to the Lee Myung-bak
government's hopes of revising or even scrapping the system entirely in an
attempt to revitalize the slowing economy. A total of 280,000 people are to
receive tax returns.
"The court gave us nearly a year to revise the system, but I don't see why we
should put off the process," GNP's chief policymaker Yim Tae-hee told reporters
Monday.
While keeping the 600 million won tax bar -- rewriting a pending government bill
that seeks to raise the bar to 900 million won -- the ruling party has decided to
lower the tax rate to 0.5-1 percent from the current 1-3 percent.
Even under such a standard, only couples owning properties worth up to 1.2
billion won, or 600 million won each, will be subject to the tax, according to
the Constitutional Court verdict last week. The court had ruled unconstitutional
the part of the real estate tax law that levies tax based on the total value of
properties owned by a household rather than by individuals, saying it is
discriminatory against married couples.
Of the 379,000 people who paid the real estate tax last year, only 147,000, or 38
percent, owned just one residence, while 61,000 owned more than five, according
to government data.
The party, however, is undecided on how to tax those who own only one home,
officials said.
The real estate tax is levied on homeowners regardless of how long they have
possessed their property.
"Opinions remain widely split on one-house owners," an unnamed official told
Yonhap. "We plan to make decision on this issue by the end of the week."
The government and the ruling party discussed over the weekend reducing the tax
by 10 to 20 percent for people who have owned only one home for three years or
more.
Some legislators, including GNP whip Hong Joon-pyo, are against the option,
claiming three years cannot be seen as "long-term possession." They also question
the fairness of more lightly taxing homeowners just because they have possessed
the homes for a longer period.
The main opposition party, meanwhile, is striving to block its rival's move. The
Democratic Party accuses the Constitutional Court of playing puppet to the
conservative government and the country's privileged class.
"The government and the ruling party are giving more speed to the writing of laws
for the privileged," said the party's leader, Chung Sye-kyun. "We will not stand
for such action."
The ruling party controls an absolute majority of 172 seats in the 299-member
unicameral house, while its main opponent holds 83.
Seven groups of high-end home owners, mostly residents in affluent neighborhoods
in southern Seoul, have filed petitions with the top court since 2006, claiming
the tax overlapped regular property taxes.
While dismissing the petitioners' arguments, the court overturned the clause on
the family-based tax formula and ordered a revision of the law by the end of next
year.
hayney@yna.co.kr
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