Parliament passes laws easing real estate transactions tax, bank ownership

(ATTN: RECASTS headline; UPDATES with more details, information from para 2)
SEOUL, May 1 (Yonhap) -- South Korea's parliament passed a string of economic
laws that the government claims are vital to fuel investments, cut waste and
boost growth, sources said Friday.
The bills call for adjustments to income and corporate taxes, easing ownership
rules for banks, and allowing the merger of the Korea National Housing Corp. and
the Korea Land Corp., which have overlapping areas of operations.
Of the bills passed, three circumvented regular legislation and judiciary
committees and review processes. They were referred directly to the plenary
session by Speaker Kim Hyung-o after lawmakers were unable to find middle ground
after months of debate.
The passage of the new income tax rules temporarily scraps high tax rates for
multiple home owners, which at present allow the government to collect 45 percent
of all profits generated by home sales.
Under the new rules that will be maintained until the end of 2010, income tax
rates will be lowered to a maximum of 35 percent, while tax rates will be lowered
for sales on land that is not used for productive purposes.
The government said levying "punitive" taxes has effectively blocked sales of
homes that could bring down housing prices, although opposition lawmakers argued
the bill will only help the rich.
The new corporate tax rules also scraps high taxes levied for land held by
companies that are not used.
Parliament, which is effectively controlled by the ruling Grand National Party,
also passed a law permitting the merger of the state-run Korea National Housing
Corp. and Korea Land Corp., which have overlapping areas of operations.
The passage of the bill could help create a new organization in October that could
implement state policies on land and housing development and act as a role model
for government efforts to streamline the public sector.
The merger had originally been opposed by the unions of the two corporations,
with experts raising concerns that it could lead to the creation of a large
money-losing company that can become a burden on the government.
Lawmakers, in addition, agreed at the last minute to ease ownership rules for
financial companies that have been effectively off-limits to non-financial
companies. Under the revised rules, manufacturing companies like family-owned
conglomerates will be allowed to hold up to a 9 percent stake in banks from 4
percent at present, with the investment ceiling on private equity funds to be
increased to 18 percent. The existing ceiling is set at 10 percent.
In the past, ownership of banks by manufacturing-based companies was restricted.
This firewall was designed to prevent companies from buying up banks and then
deposits for its own business purposes.
Seoul said limiting ownership effectively discriminated against local companies
compared to foreign firms and hindered efforts to sell state holdings in
financial institutions like the Korea Development Bank (KDB).
Others bills passed include a measure that will allow the National Health
Insurance Corp. to collect the country's health, employment, industrial accident
insurance premiums and state pensions. Meanwhile, a news agency promotion law
aims to enhance the competitiveness of Yonhap News Agency.
The passing of the economic bills, meanwhile, is expected to boost the incumbent
administration's drive to revive the sagging economy by stimulating consumer
spending and business activities through sales cuts and government stimulus
programs.
On Wednesday, parliament approved an unprecedented 28.4 trillion won (US$22.0
billion) extra budget plan that will be used to create 250,000 new jobs,
strengthen the country's social security net and start large public works
projects.
yonngong@yna.co.kr
(END)