S. Korean government, ruling party settles on tax relief proposals

The government and the ruling Democratic Party agreed on tax relief for single homeowners and retail stock investors, in an apparent move to soothe public anger over increased levy burden under the Moon Jae-in administration.

According to Finance Minister Hong Nam-ki on Tuesday, the government scrapped its initial plan to broaden the tax base for capital gains to include retail stock investors who own stocks worth over 300 million won in a single company.

This means the current standard -- equity holdings in a company exceeding 1 billion won -- will stay unchanged.

The Finance Ministry announced in July the plan to lower the taxation threshold to 300 million won from 2021, stirring up complaints from retail investors for fueling stock market volatility.

This, coupled with the government’s radical push to hike taxes on home ownership, has fueled criticism on the current administration and the ruling party. The opposition party, seeking to capitalize on growing public discontent, has made the issues their top agenda for next year’s by-elections in Seoul and Busan.

Tuesday’s announcement came after the Democratic Party, sensing a crisis in support from middle-class voters, rolled up its sleeves to water down some of the government’s controversial tax policies.

The finance minister, who initially refused to backtrack on the ministry’s taxation plan, offered to resign Tuesday.

“I offered to resign because I thought I needed to take a responsibility for this issue that has sparked debates for the past two months,” Hong said. Cheong Wa Dae immediately refused to accept his resignation.

As for another hot potato -- property tax -- the ruling party and the government have agreed to cut the tax rate by 0.05 percent points for those who own one house with a taxable value of 600 million won or less.

The two have discussed to reduce tax burdens for owners of a low-price house. Currently, a property tax ranging from 0.1 percent to 4 percent is levied on land and buildings for residential and commercial use.

The ruling party demanded lighter property tax burdens for houses with values under 900 million won but Cheong Wa Dae pushed ahead with setting 600 million won as the upper limit.

Cheong Wa Dae reportedly asserted that a house with a value of 900 million won when officially assessed for taxation should be seen a high-end house, as it would actually fetch about 1.3 billion won on the market.

Claiming that the Moon administration’s property taxation policy hinders the stabilization of people’s livelihoods with hefty tax burdens, lawmakers of the main opposition People Power Party proposed bills which seek to reduce up to 50 percent of property tax for single homeowners.

Kim Chong-in, interim leader of the main opposition People Power Party, said Monday that housing prices and taxes will be key agenda items for Seoul and Busan mayor by-elections next year.

“We have to set up strategies that will let the public know how much they have to pay for the property tax bills they will receive in the autumn,” he said.

By Park Han-na (hnpark@heraldcorp.com)