Political disputes run high over property tax reform By Shin Hae-in

SEOUL, Sept. 23 (Yonhap) -- The government's controversial plan to raise the
comprehensive real estate tax threshold faced an unexpected hiccup Tuesday, with
the ruling party floor leader stating the party has yet to "fully agree" to the
proposal.
The South Korean government had earlier announced it will raise the bar for
properties that are subject to the controversial comprehensive real estate tax
from the current 600 million won (US$521,740) to 900 million won.
While the government, headed by conservative CEO-turned-President Lee Myung-bak,
claims the reform will help resuscitate the slowing economy by easing the burden
on homeowners, opponents say the policy is designed only for the rich and may
increase rampant real estate speculation.
"We have not completely agreed to the government's proposal (to readjust the
property tax system)," Hong Joon-pyo, floor leader of the ruling Grand National
Party, said during a party meeting Tuesday. "As the final responsibility will
fall on us, the governing party, we must be more cautious and hold more
discussions with the government."
Hong's remarks contradict reports Monday that the party and the government agreed
on settling the tax reform, amid skepticism from a vast majority of South Koreans
toward the plan.
The ownership tax was first introduced in 2005 under the former Roh Moo-hyun
administration as a punitive measure against the rich as it levies additional
taxes on high-value real estate holdings by a household.
The nation's conservatives and relatively well-off people living in the southern
Seoul area have been against the system. Eighty Seoul residents filed a
constitutional petition in 2006 to rescind the tax. The top court has yet to rule
on the issue.
"It is inappropriate that single-house owners who have spent all their lives
earning money to buy the house are subject to such heavy tax burdens," Finance
Ministry Kang Man-soo said earlier. "Many elderly people are paying the tax by
borrowing money. This is hardly acceptable."
Once the bar is raised, more than 200,000 households will be free from the real
estate tax payment, saving households a total of 2.23 trillion won in tax burdens
by the end of 2010, according to the Finance Ministry.
Populist politicians belonging to progressive opposition parties, are strongly
against the plan and are warning of collective action against the Lee
government's tax reforms which they claim will only widen the income gap.
"The Lee Myung-bak administration is continuously disappointing the public with
policies only for the country's privileged one percent," Rep. Park Byeong-seung
of the main opposition Democratic Party said. "This is hardly the time to present
plans for homeowners when many, many people are suffering without homes and
stable incomes."
The latest move reflects the government's economic policy objective to boost
consumer spending and revitalize the housing and construction market, accounting
for about 18 percent of the country's gross domestic product.
Earlier this month, the government had unveiled far-reaching tax reforms which
included income and corporate tax cuts anticipated to save people an estimated
11.7 trillion won in tax payments by the end of next year.