Cabinet approves real estate tax cut amid lingering disputes

SEOUL, Sept. 30 (Yonhap) -- The Cabinet on Tuesday approved a bill to cut tax
rates for high-end homeowners here, leaving the final decision in the hands of
the parliament, which remains largely critical of a plan many describe as
designed for the rich.

Under the motion, the threshold for South Korea's so-called comprehensive real
estate tax will be raised from 600 million won (US$520,000) to 900 million won,
freeing some 200,000 households from the tax currently paid in tandem with
regular property taxes.
While critics say the plan will end up increasing the already wide income gap,
Seoul's conservative government claims the adjustment will help resuscitate the
sagging economy by easing the burden on homeowners.
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.
Because South Korea's tax revenue is expected to decrease by 2.23 trillion won by
the end of 2010 once the revision takes effect, economic policymakers have hinted
at a possible increase in regular property taxes on general households, adding to
the ongoing dispute.
Legislators, including those belonging to President Lee Myung-bak's conservative
party, are against increasing the tax burden on the majority of citizens and vow
to revise details of the plan during the legislative process next month.
While accepting the government's proposal after much internal dispute, the ruling
Grand National Party said the plan will be "open to more adjustments" during
parliamentary deliberation.
The conservative party has been hesitant to throw immediate support behind the
president as it is aware of its image as a "wealthy party," with many of its own
members possessing homes in the capital's more well-off regions.
Populist politicians belonging to progressive opposition parties are more
strongly opposed to the plan.
"Policies for the rich and the privileged will not stand in this country," the
main opposition Democratic Party said in a statement Monday, threatening to take
the issue to the streets.
The ruling party holds a majority 172 seats in the 299-member unicameral house,
with the main opposition and minority parties controlling the remainder. The vote
requires a quorum of more than half of the 299 parliamentarians and the support
of at least half of those present.
First introduced in 2005 under the former Roh Moo-hyun administration, which
placed importance on the distribution of wealth, critics have called the real
estate tax a "punitive measure" against the rich.
Many people with high-value real estate holdings have been fighting against the
current tax system, with 80 Seoul residents filing a constitutional petition to
repeal the regulation in 2006. The top court has yet to rule on the case.
The Cabinet on Tuesday also approved a 26 trillion won tax cut package to be
implemented over the next five years. The far-reaching tax reforms include income
and corporate tax cuts.