(LEAD) Gov't may cancel real estate tax revision: official

(ATTN: RECASTS lead for simplicity; ADDS details from para 7, RESTRUCTURES throughout)
By Shin Hae-in

SEOUL, Sept. 24 (Yonhap) -- The government is considering scrapping a plan that eases the tax burden on high-end homeowners amid heated criticism that the measure only benefits the wealthy, ruling party officials said Wednesday.

Disputes have been intense here since the government announced Tuesday it will
adjust the threshold for the so-called comprehensive real estate tax from the
current 600 million won ($521,740) to 900 million won.
More than 200,000 households, mostly in the country's affluent southern Seoul
districts, will be exempted from the real estate taxes once the plan takes
effect, according to the Finance Ministry.
"The general consensus is that tax reforms are inevitable, but details should be
discussed further," an official of the ruling Grand National Party (GNP) told
Yonhap on condition of anonymity. "Maintaining the 600 million won threshold is
one of the many options."
First introduced in 2005 under the former Roh Moo-hyun administration, which
placed importance on the distribution of wealth, the real estate tax is paid in
tandem with regular property tax. Some have called the law a punitive measure
against the rich as it levies additional taxes on people with high-value real
estate holdings.
Seoul's incumbent government, headed by conservative CEO-turned-President Lee
Myung-bak, claims the adjustment will help resuscitate the sagging economy by
easing the burden on homeowners. Opponents say the policy is designed only for
the rich and will fan rampant real estate speculation.
Facing strong criticism after agreeing to the government proposal Monday, the
governing GNP hurriedly altered its position, requesting the government to "take
more time" in finalizing the plan. At least one third of its 172 members are
against drastic revision of real estate tax, officials say.
The presidential office kept low-key on the plan, which will be voted in a
Cabinet meeting on Oct. 2 and submitted to the parliament for approval later that
month.
"The governing party has proposed keeping the 600 million won threshold, but
nothing has been concluded. We are not sure, at the moment, of the president's
opinion on the matter either," an unnamed Blue House official said.
The Finance Ministry hinted a possible increase in the regular tax property late
Tuesday, adding to escalating disputes.
While reforming the real estate tax system will benefit slightly more than 2
percent of South Korea's 15 million households, the new tax-calculation is
expected to raise ordinary property taxes on the much larger population.
Finance Minister Kang Man-soo held firm.
"The Constitution says that people shouldn't pay taxes more than they can bear,"
he told a forum in Seoul Wednesday. "The comprehensive real estate holding tax
should be removed once and for all as the most symbolic measure of the incumbent
government."
Many of the nation's conservatives and wealthy live in high-priced southern
Seoul, and have been fighting against the current tax system. In 2006, 80 Seoul
residents filed a constitutional petition to repeal the regulation. The top court
has yet to rule on the case.
Populist politicians belonging to progressive opposition parties continued to
oppose to the new plan, warning of a collective action against the Lee
government's tax reforms.
"We will not sit idle on a policy designed only for the privileged," Chung
Sye-kyun, chairman of the main opposition Democratic Party said.
The latest move reflects the government's economic policy of boosting consumer
spending and revitalizing the housing and construction markets, which account for
about 18 percent of the country's gross domestic product.
Earlier this month, the government announced far-reaching tax reforms which
included income and corporate tax cuts anticipated to save people an estimated
11.7 trillion won by the end of next year.
hayney@yna.co.kr
(END)