ID :
48378
Mon, 03/02/2009 - 08:01
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Shortlink :
https://www.oananews.org//node/48378
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(EDITORIAL from the Korea Times on March 2) - Lower Tax Policy
The Lee Myung-bak administration is seeking to further ease tax burdens in a desperate bid to stimulate the sinking economy. The Ministry of Strategy and Finance plans to present tax cut bills to the National Assembly next month.
The plan will follow last year's set of packages to reduce income, corporate and
property taxes. The ministry is expected to focus on slashing capital gains tax
to inject fresh air into the slumping property market amid the global financial
and economic crisis.
Ministry officials seem to believe that capital gains tax is weighing down on the
market and intend to ease the tax burden to promote property trade and thereby
help speed up economic recovery. Tax rates began to surge around 2005 in efforts
to combat property speculation. Along with the punitive tax on high-priced homes
and land, capital gains tax was one of the strong policy tools of the previous
government to curb runaway property prices.
Last year, the Lee administration revised down the capital gains tax rates and
raised the minimum value of taxable homes from 600 million won to 900 million
won. It has also cut the rates further to encourage people to buy newly
constructed apartments that remain unsold. However, the housing market has shown
no signs of getting out of the current slump. Furthermore, land trade has come to
a standstill in the face of the worldwide economic crisis.
Minister of Strategy and Finance Yoon Jeung-hyun said Friday that the government
should overhaul the capital gains tax system, stressing the need for a tax cut.
He has already emphasized the importance of propping up the market amid fears of
asset deflation. It is apparent that he is highly conscious of a hard landing for
the local property market, which might increase bad loans at banks, as a large
portion of their credit is collateralized by homes and land.
It is necessary to prevent a tumble in property prices to ensure financial and
economic stability. But the problem is whether the government can achieve its
policy goals by just lowering capital gains tax. Policymakers should not forget
that they have come under attack for trying to cut taxes in favor of a small
number of wealthy people and businesses. Therefore, they should take a cautious
approach to a capital gains tax cut which might have a boomerang effect in tune
with an economic recovery, reviving the specter of property speculation.
It would be better for the government to increase fiscal spending rather than tax
cuts to create more jobs, strengthen the social safety net, and jumpstart the
economy. It remains to be seen what additional policy options the economic team
of the Lee administration will take to come to the rescue of Korea Inc.
(END)
The plan will follow last year's set of packages to reduce income, corporate and
property taxes. The ministry is expected to focus on slashing capital gains tax
to inject fresh air into the slumping property market amid the global financial
and economic crisis.
Ministry officials seem to believe that capital gains tax is weighing down on the
market and intend to ease the tax burden to promote property trade and thereby
help speed up economic recovery. Tax rates began to surge around 2005 in efforts
to combat property speculation. Along with the punitive tax on high-priced homes
and land, capital gains tax was one of the strong policy tools of the previous
government to curb runaway property prices.
Last year, the Lee administration revised down the capital gains tax rates and
raised the minimum value of taxable homes from 600 million won to 900 million
won. It has also cut the rates further to encourage people to buy newly
constructed apartments that remain unsold. However, the housing market has shown
no signs of getting out of the current slump. Furthermore, land trade has come to
a standstill in the face of the worldwide economic crisis.
Minister of Strategy and Finance Yoon Jeung-hyun said Friday that the government
should overhaul the capital gains tax system, stressing the need for a tax cut.
He has already emphasized the importance of propping up the market amid fears of
asset deflation. It is apparent that he is highly conscious of a hard landing for
the local property market, which might increase bad loans at banks, as a large
portion of their credit is collateralized by homes and land.
It is necessary to prevent a tumble in property prices to ensure financial and
economic stability. But the problem is whether the government can achieve its
policy goals by just lowering capital gains tax. Policymakers should not forget
that they have come under attack for trying to cut taxes in favor of a small
number of wealthy people and businesses. Therefore, they should take a cautious
approach to a capital gains tax cut which might have a boomerang effect in tune
with an economic recovery, reviving the specter of property speculation.
It would be better for the government to increase fiscal spending rather than tax
cuts to create more jobs, strengthen the social safety net, and jumpstart the
economy. It remains to be seen what additional policy options the economic team
of the Lee administration will take to come to the rescue of Korea Inc.
(END)
