'Additional Comprehensive Real Estate Tax Deduction for Those with Housing Loans'... Ruling Party Proposes Bill

Rep. Yu Kyung-jun Prepares to Propose Amendment to Comprehensive Real Estate Tax Act
Drive to Ease Tax Burden
Opposition Faces Difficulties Passing Wealthy Tax Cut Frame

[Asia Economy Reporter Lee Hyun-joo] The ruling party is set to propose a bill that allows an additional deduction of a certain percentage of housing-related loans when calculating the comprehensive real estate holding tax (종합부동산세, 종부세). This move is interpreted as an effort to further ease the real estate tax burden, following the government's decision to raise the basic exemption amount for 종부세 to 900 million KRW. Rep. Yoo Kyung-joon of the People Power Party, who is preparing the amendment, stated, "If the purpose of 종부세 is income redistribution, it is appropriate to levy the tax based on net assets," viewing 종부세 as a form of double taxation with property tax and aiming to reduce it. However, the bill is expected to face difficulties in passing due to opposition parties framing it as a 'tax cut for the wealthy.'

According to political circles on the 18th, Rep. Yoo is preparing a partial amendment to the 종부세 law that raises the basic exemption amount for the tax base to 1.5 billion KRW regardless of the number of houses owned and allows an additional deduction of a certain percentage of housing-related loan amounts. A representative from Rep. Yoo's office explained regarding the deduction on housing-related loans, "It does not reduce the total debt amount," and added, "The deduction rate will be determined by the government through enforcement ordinances." They further explained, "종부세 is a unique law held only by South Korea and France, and the intention is to avoid double taxation with property tax by excluding debts and taxing only net assets." If a partial deduction for housing-related loans is granted, it is likely to benefit so-called 'Young-kkeul-jok'?those who have taken on significant debt to buy homes. The representative also mentioned, "Like the fair market value rate, the government may need to flexibly adjust tax rates depending on market conditions."

The ruling party has recently been proposing related bills in line with the government's policy to reduce the 종부세 burden. Rep. Bae Jun-young of the People Power Party introduced a bill yesterday that includes most of the government's announced measures, raising the basic exemption amount for the 종부세 tax base from the current 600 million KRW to 900 million KRW (and from 1.1 billion KRW to 1.2 billion KRW for single-household owners). Earlier, Rep. Ryu Seong-geol also submitted an amendment last month concerning special exemptions for 종부세 for temporary two-homeowners, such as those who inherited houses or own homes in provincial areas.

Since 종부세 is closely linked to people's livelihoods, the Democratic Party plans to hold a discussion session on 종부세 this afternoon at the policy committee level to set guidelines. The Democratic Party intends to comprehensively review the tax reform proposals submitted by the government, including 종부세. A Democratic Party member of the National Assembly's Strategy and Finance Committee said, "Although there are concerns about reduced tax revenue due to 종부세 easing policies in the process of moving toward a welfare state, it is necessary to carefully examine this considering the real estate policy failures during the Moon Jae-in administration."

However, the Strategy and Finance Committee, which oversees 종부세, is currently facing disruptions due to the appointment issue of the tax subcommittee chair, and it is uncertain to what extent the opposition will accept the proposals, making the final legislation difficult. The opposition argues that since the chair of the Strategy and Finance Committee is from the ruling party, the tax subcommittee chair should be held by the opposition. The processing of the 종부세 exemption special law (including the 종부세 Act and the Restriction of Special Taxation Act), which raises the basic exemption for single-homeowners to 1.4 billion KRW for this year only and excludes temporary two-homeowners, inherited houses, and low-priced provincial houses from the 종부세 taxable house count, is currently delayed. Last year, the Strategy and Finance Committee also faced difficulties in passing the 종부세 Act that increased the exemption amount for single-homeowners to 1.1 billion KRW ahead of the implementation of the tax special case for jointly owned houses by married couples.

Rep. Ryu Seong-geol, the ruling party's secretary of the Strategy and Finance Committee, said, "If the 종부세 processing is delayed due to the subcommittee, we may have no choice but to hold a Special Committee for Livelihood and Economic Stability to pass it," but added, "However, fundamentally, it should be passed in the Strategy and Finance Committee. We ask for the opposition's cooperation."