The Korea Herald/ANN: South Korea is facing another set of brawls this year concerning taxation equity and wealth distribution, as the government and ruling party signalled at further toughening tax rules for affluent property owners, according to officials Monday.
Detailed prospects, however, remain unclear as related ministries held different stances over the reduction of benefits for lease business operators – an action that may deliver a blow upon the government’s policy credibility.
“We will begin discussing with the ruling party on ways to reinforce the comprehensive real estate tax bill,” said an official of the Ministry of Economy and Finance.
“As the government bill [on the agenda] already exists, the upcoming alterations are likely to involve stronger regulations [on the comprehensive tax].”
The ministry had proposed in July a set of tax hike plans, focusing on raising the tax rate on owners of multiple homes and of high-priced properties, as part of its effort to level off skyrocketing prices and to reduce the widening income gap.
The scheme included a tax rate hike for real estate priced at 600 million won ($540,000) or more, with the maximum rate to be raised to 2.5 per cent from the current 2 per cent.
While the government-led proposal involves a tax boost amounting to 742 billion won next year, the ruling progressive Democratic Party of Korea has been pushing ahead with more drastic taxation scenarios.
“The government should strongly consider strengthening the comprehensive real estate tax on those who own more than three apartments or high-priced apartments,” said Representative Lee Hae-chan last week during his first meeting as party chief with senior officials of Cheong Wa Dae.
As the nation’s fiscal headquarters, the Finance Ministry is taking a more prudent stance over flip-flopping on the policy announced only months ago.
“[The tax benefits] had the intended effect of encouraging multi-home owners to register themselves as business operators, but also contributed to the housing price hike,” said an official from the ministry.
“We shall keep a close watch on market situations before taking actions.”