(ROUNDUP) Lee determined to cut property taxes for the rich

(COMBINES with previous story on political parties' reactions)
By Yoo Cheong-mo and Shin Hae-in
SEOUL, Sept. 24 (Yonhap) -- President Lee Myung-bak on Wednesday defended his
government's proposal to drastically slash property taxes for expensive home
owners, snubbing growing public criticism that his policies are preferential to
the rich.
Lee said that the government proposal, which would abolish the hefty
comprehensive property tax for owners of homes valued at over 600 million won
(US$522,000) apiece and steeply lower the special tax for owners of homes priced
above 900 million won a unit, is primarily intended to rectify the problematic
taxation system, according to his spokesman.
"The genuine purpose for the planned property tax cuts for expensive home owners
is not to lower tax burdens for the wealthy, but to correct a wrongful taxation
system," Lee was quoted by presidential spokesman Lee Dong-kwan as saying in a
meeting with his senior secretaries.
"The Lee Myung-bak government is still committed to improving and stabilizing the
livelihood of ordinary people."
Lee's remark came amid an intensifying debate within local political circles over
the government's bid to gradually repeal the tax system applied to high-end home
owners, which was introduced three years ago by Lee's predecessor, Roh Moo-hyun.
Currently, the owner of a home valued at 600 million won pays about 1 million won
in comprehensive property taxes annually, while a house valued at 900 million won
incurs a special ownership tax of slightly over 2 million won a year. The
comprehensive property taxes, legislated by the Roh government in 2005 to help
stabilize the local real estate market, are collected in addition to regular
property taxes.
Under the Lee government's revision, owners of homes valued at less than 900
million won apiece will be exempted from the taxation, while the amount of
comprehensive property tax for the owner of a 900 million won home will be
reduced to a mere 20,000 won.
Lee's spokesman also strongly defended the government's tax reduction scheme for
the rich in his media briefing.
"Some contend that the revision of the comprehensive property taxation system is
just intended for the welfare of the richest 1 percent of the population. But the
government's position is that it is interested in eliminating any 'punitive'
taxes on a specific group of people," he said.
The revision is subject to approval from the National Assembly.
But the outlook for parliamentary approval remains clouded in the face of fierce
resistance from opposition parties, as well as ordinary citizens. Interestingly,
many lawmakers from even the ruling Grand National Party (GNP) are also opposed
to Lee's bid to repeal the special property tax for the rich, apparently for fear
of a backlash from voters.
"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 present 600 million won
threshold is one of the many options."
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, Cheong Wa Dae, kept low-key on the plan, which will be
voted on in a Cabinet meeting on Oct. 2 and submitted to 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 Cheong Wa Dae 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 for the larger population.
Finance Minister Kang Man-soo also held firm.
"The Constitution says that people shouldn't pay taxes more than they can bear,"
he said in 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 idly by 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.