LEAD) Ruling party to accept government's real estate tax cut proposal

(ATTN: UPDATES with details from para 4; RESTRUCTURES)
By Shin Hae-in

SEOUL, Sept. 29 (Yonhap) -- South Korea's ruling party is to accept a government-led plan to ease the tax burden on high-end homeowners, officials said Monday, despite lingering criticism that it will only benefit the rich.

The issue over raising the threshold for the so-called comprehensive real estate
tax by up to 300 million won (US$250,000) has become the latest bone of
contention here, with critics saying the plan will end up increasing the already
wide income gap.
The ruling Grand National Party (GNP) has been struggling to reach a consensus
with more progressive members of the conservative party still skeptical of the
proposal.
"We decided to accept the initial government proposal and revise details during
the parliamentary deliberation period," Cho Yoon-sun, the party's spokeswoman,
told reporters after a party meeting Monday.
By raising the minimum threshold from homes valued at 600 million won to those
priced at 900 million won apiece, nearly 200,000 households, mostly in the
country's affluent southern Seoul districts, will be exempted from tax under the
revised law. The current taxes on high-value real estate holdings are paid in
addition to regular property taxes.
The plan will be submitted to the parliament for approval after a Cabinet
endorsement on Oct. 2.
"There will not be any increased tax burden on the general public," Cho assured.
"People have our word."
Although the ruling party, holding a majority of 172 seats in the 299-member
unicameral house, will likely hold sway over the bill's passage, opposition
legislators remain strongly opposed, threatening a collective action against the
proposal.
The Finance Ministry hinted last week at a possible increase in regular property
taxes following the tax reduction on costly homes, adding to the dispute.
While reforming the real estate tax system will benefit slightly more than 2
percent of South Korea's 15 million households, the ministry's new tax
calculation could raise ordinary property taxes on a much larger percentage of
the population.
"We cannot, and will not, accept a plan that will reduce taxes for the country's
most wealthy, while increasing the burden on over 13 million ordinary
households," said Choi Jae-sung, spokesman of the main opposition Democratic
Party.
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.
Calling it a "punitive measure" against the rich, many people with high-value
real estate holdings 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.
The latest move reflects the Lee Myung-bak government's economic policy of
boosting consumer spending while 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.
The ruling party has been hesitant to throw immediate support behind the
conservative president, aware of its image as a party of the wealthy and with
many of its own members possessing homes in the capital's more well-off regions.
hayney@yna.co.kr
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