The government and the ruling party agreed Monday to retroactively apply a proposed tax cut on home purchases as part of efforts to encourage transactions in the sluggish property market, a ruling party lawmaker said.
The proposal, announced by the government on Aug. 28, calls for lowering the acquisition tax rate on houses valued at less than 600 million won ($565,000) to 1 percent from the current 2 percent.
The tax levied on homes valued at between 600 million won and 900 million won would remain the same at 2 percent, while the tax on homes worth more than 900 million won would be lowered to 3 percent from the current 4 percent.
The government called for applying the tax cut starting on Jan. 1 next year amid concerns it could lead to a fall in tax revenue for local governments. The acquisition tax is a local tax.
However, the ruling Saenuri Party insisted on applying the cut retroactively, and the two sides agreed to put it into force from Aug. 28, the day the measure was announced.
"The party's demand that the housing market be normalized by reflecting the public's expectations of the government's announcements and by raising the effectiveness of the announced measures was accepted," Rep. Hwang Young-cheul of the ruling party said at a press conference following a meeting between Security and Public Administration Minister Yoo Jeong-bok and ruling party lawmakers on the National Assembly's security and public administration committee.
Under the new tax cut, local governments are expected to lose about 780 billion won in tax revenues. The government and the ruling party agreed that they would fill the gap with state funds.
Following the agreement, the parliamentary security and public administration committee proposed a revision to the Local Taxes Act to its bill evaluation subcommittee.
The subcommittee is expected to meet as early as Tuesday to discuss the revision and forward it to the full committee later in the week before the National Assembly puts it to a vote at a plenary session on Nov. 15. (Yonhap News)
