Gov't to keep minimum real estate tax base

(ATTN: RECASTS lead; REPHRASES para 3; ADDS details from para 6)
SEOUL, Nov. 24 (Yonhap) -- The baseline for a special tax levied on owners of
expensive homes will remain at the current level, officials said Monday,
concluding discussions over a controversial tax system opposed by the nation's
wealthy.
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 and narrow the income gap.
The incumbent government, led by former Hyundai CEO Lee Myung-bak, has long
attempted to revamp the tax, seeing it as a punitive measure that goes against
free market principles.
During a government-ruling party meeting Monday, officials decided to keep the
600 million won tax bar -- rewriting a pending government bill that seeks to
raise the bar to 900 million won -- while lowering the tax rate to the 0.5-1
percent range from the current 1-3 percent range.
Those who own only one home will receive tax deductions, their tax bar starting
at 900 million won or higher.
Details will be negotiated with opposition parties, according to a lawmaker of
the ruling Grand National Party (GNP) who asked not to be named.
Opposition parties are against amending the progressive tax system and have
accused their conservative counterparts of siding with the privileged classes.
Monday's decision follows a recent Constitutional Court ruling that partly struck
down the much-disputed tax system, paving the way for the government to refund a
significant portion of collected taxes. The court also gave momentum to the Lee
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.
Even under the current baseline, 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 court's 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.
Monday's decision is likely to receive parliamentary approval as the ruling GNP
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