Government's Will Undermined... National Assembly Postpones Discussion on Abolishing Re-Charge Tax

The law to abolish the Reconstruction Excess Profit Recovery System (Jaechohwan) was submitted as an agenda item to the National Assembly Land, Infrastructure and Transport Committee's bill review subcommittee on the 6th, but the review was postponed due to disagreements between the ruling and opposition parties.

On that day, the Land Committee decided to continue reviewing the 'Act to Abolish the Reconstruction Excess Profit Recovery Act' proposed by Kim Eun-hye, a member of the People Power Party.

Jaechohwan is a system that recovers taxes when the profit per member from reconstruction projects exceeds an average of 80 million KRW. It was introduced in 2006 during the Roh Moo-hyun administration but was deferred due to reasons such as the real estate market downturn, and was revived in 2018 under the Moon Jae-in administration. Since then, it has been pointed out as the biggest obstacle to reconstruction projects, and the current government and opposition parties struggled over it for more than a year before revising the exemption criteria (from 30 million KRW to 80 million KRW or less) last March.

The government and ruling party did not stop at easing the regulations. In June, Representative Kim proposed the abolition bill as the first bill of the 22nd National Assembly, and the Ministry of Land, Infrastructure and Transport, the competent authority, officially announced the abolition of Jaechohwan in the 'Housing Supply Activation Plan' released in August.

However, the opposition parties, including the Democratic Party of Korea, have shown a negative stance toward abolition. They argue that it is inappropriate to abolish the law when the eased Jaechohwan law has been in effect for less than eight months.

The Ministry of Land, Infrastructure and Transport has consistently expressed the position that Jaechohwan should be abolished. Jin Hyun-hwan, the first vice minister of the Ministry, appeared on MBC Radio's 'Economy in Your Hands' on the morning of the same day and emphasized the necessity of abolishing Jaechohwan. Vice Minister Jin said, "(Jaechohwan) is a tax on unrealized income, and if the house price falls after payment, the question arises of 'who will return it?'" He added, "There have been many controversies about double taxation, and in fact, it is not easy to operate."