Democratic Party Seriously Considering Differential Property Tax Reduction by Housing Price

Based on a 0.05% point standard, applying a lower exemption rate if raised to 900 million
Main concern is local government tax revenue gap... Tax principle suggests 600 million

Kim Tae-nyeon, Floor Leader of the Democratic Party of Korea, and Han Jeong-ae, Chair of the Policy Planning Committee, are attending the Policy Coordination Meeting held at the National Assembly on the 29th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Park Cheol-eung] The Democratic Party of Korea is seriously considering a plan to differentiate the property tax reduction rate based on housing prices. This is a compromise measure following internal party discussions proposing to extend the original 600 million KRW threshold to 900 million KRW. A uniform reduction up to 900 million KRW is unlikely, as it contradicts the rationale of easing the burden on 'middle- to low-priced single-homeowners' and would cause a sharp decline in local government tax revenues, especially in Seoul. There is also a strong possibility that the party will maintain the 600 million KRW threshold in accordance with the principle of tax justice. The Democratic Party plans to consolidate opinions as early as the 29th and begin final negotiations with the government.

On the 29th, a senior Democratic Party official stated, "We have sufficiently gathered opinions from party lawmakers and local government heads, and only the leadership's final decision remains," adding, "If the threshold is expanded to 900 million KRW, we are considering a plan to differentiate the reduction rate by housing price brackets, based on a 0.05 percentage point standard."

The current property tax rates are 0.1% for properties valued at 60 million KRW or less, 0.15% for 60 million to 150 million KRW, 0.25% for 150 million to 300 million KRW, and 0.4% for over 300 million KRW. The Democratic Party initially planned a uniform 0.05 percentage point reduction for homeowners with properties valued at 600 million KRW or less, but now they may apply a lower reduction rate for relatively high-priced homes while expanding the eligible range.

Regarding this, Han Jeong-ae, the Democratic Party Policy Committee Chair, told reporters after a closed-door Supreme Council meeting, "Various ideas, including differentiated reduction plans, are being discussed." She added, "We are also listening to local government heads, but since this concerns tax revenue, there are concerns. We need to listen thoroughly and organize the opinions." Chair Han said, "The decision will not take long," and added, "We expect to finalize it within this week."

Property tax, a local tax, forms the foundation of local finances. Based on the official price of apartment complexes, in Seoul, 62.6% of properties are valued at 600 million KRW or less, but this rises to 79.5% if the threshold is raised to 900 million KRW. This is a major consideration that prevents hasty decisions on the extent of property tax reductions. A Democratic Party official said, "Some lawmakers support expanding the threshold to 900 million KRW, but local government heads strongly worry that reduced tax revenue will directly impact district administration," adding, "When the 900 million KRW expansion was mentioned, district heads in Seoul were particularly alarmed."

The government also opposes the 900 million KRW expansion on tax principle grounds. Even within the Democratic Party, opinion coordination is still needed ahead of party-government consultations. On the same day, Democratic Party lawmaker So Byung-hoon appeared on CBS Radio's 'Kim Hyun-jung's News Show' and said, "This is not about housing prices; even those living in 2 billion KRW homes should be treated the same," emphasizing, "Even if the house price is high, single-homeowners should be supported." On the other hand, a staff member from a lawmaker's office in the National Assembly's Planning and Finance Committee told Asia Economy, "Providing tax reduction benefits to those owning homes valued over 1 billion KRW violates the principle of tax justice through fair taxation." Criticism from regions with fewer high-priced homes and views that this is a political move ahead of next year's by-elections may also be burdensome.