Democratic Party to Propose Comprehensive Real Estate Tax Reduction Bill... Justice Party Says "Ruling and United Parties Colluding"

[Image source=Yonhap News]

[Asia Economy Reporter Park Cheol-eung] Following the United Future Party, the Democratic Party of Korea is also set to propose a bill to ease the comprehensive real estate holding tax (종합부동산세, 종부세) for single-homeowners. The Justice Party strongly criticizes this, stating that "the ruling party and the main opposition party are colluding to reduce the 종부세."

Democratic Party lawmaker Kim Byung-wook said in a phone interview with Asia Economy on the 4th, "As promised in the last general election, we will propose an amendment to the 종부세 law as early as this week to ease the 종부세 burden on genuine single-homeowners by increasing the special deduction rate for long-term ownership."

The basic idea is that real estate policy aims to block speculation and protect genuine buyers through market stabilization, but it is problematic if even genuine buyers face difficulties.

The core proposal is to apply a tax credit rate of 50-90% by dividing the housing ownership period starting from 5 years into 5-year increments. Additionally, a new tax credit of 10-30% will be introduced based on the residence period, and adjustments to the increase rate of tax burden compared to the previous year will also be included.

Prime Minister Chung Sye-kyun stated in a media interview on the 11th that "partial easing of the 종부세 is possible only for single-home households," and Lee Nak-yeon, chairman of the Democratic Party’s COVID-19 National Crisis Response Committee, hinted before the general election that "consideration reflecting reality is necessary when there is no sharp income." Democratic Party floor leader Kim Tae-nyeon also expressed that "reducing the 종부세 burden is possible as discussed during the general election."

Of course, the United Future Party is more proactive. Bae Hyun-jin, a lawmaker elected from the Seoul Songpa-eul district, an area dense with high-priced homes, proposed an amendment to the 종부세 law the day before to expand the deduction rates for single-homeowners aged 60 or older and those with long-term ownership of over 5 years.

The bill also includes lowering the official price ratio, known as the fair market value ratio, which is applied when determining the tax base for the 종부세. According to the current government enforcement decree, the ratio is set to increase to 90% this year, 95% next year, and 100% in 2022, but the proposal aims to legislate it at 80%. Another key point is raising the tax base deduction amount from 600 million KRW to 900 million KRW (1.2 billion KRW for single-home households), considering the rise in housing prices.

Independent lawmaker Hong Joon-pyo stated on Facebook that "the 종부세 has deviated from its original purpose and turned into a kind of wealth tax, becoming an irregular tax imposed when a single property exceeds a certain official price," and argued that "the 종부세 should be abolished and integrated into the property tax system."

However, the Justice Party criticized, "If Bae’s amendment passes, the current 종부세 imposition threshold, which starts at around 1.2 to 1.3 billion KRW in actual transaction prices, will rise to 1.5 to 1.6 billion KRW. Furthermore, the deduction rate, which can already reach up to 80% through long-term ownership and senior citizen deductions, could increase to 90%. In short, the ruling party and the main opposition party are joining forces in a '종부세 reduction collusion.'"