The government has officially formalized adjustments to its tax reform plan and begun comprehensive review. The plan is to prepare a revised tax reform package before submitting it to the National Assembly, which is an unusual move since it comes before discussions even begin in the regular session of the legislature.
It is interpreted that the government felt pressure to push forward with related tax measures amid strong public opposition to the overall real estate tax system and as the stock market, which had been soaring, entered a correction phase.
As of 2 p.m. on the 12th, over 5,300 legislative opinions had been posted on the website of the National Participation Legislation Center regarding the comprehensive real estate tax revision bill that was publicly announced for comment. Most of these opinions oppose the government's plan to strengthen the supplementary real estate tax.
The Ministry of Economy and Finance's real estate tax reform plan, released on the 3rd, included provisions to strengthen the supplementary real estate tax primarily targeting non-residents and multi-homeowners. Under the government's proposal, even single-homeowners who are non-residents would face a heavier burden from the supplementary real estate tax.
Therefore, residency status is at the core of the supplementary real estate tax reform plan. The Ministry of Economy and Finance stated that cases such as school enrollment, illness, transferring schools, overseas residence, and caring for parents will be considered 'involuntary non-residence,' and the period of non-residence due to these reasons will be recognized as a period of residence. The maximum duration for such exceptions is three years.
However, voices are growing calling for broader recognition of 'involuntary non-residence' and an extension of the exception period. The government appears to acknowledge these criticisms to some extent. Consequently, the revised plan is expected to include relaxed criteria for non-resident exceptions.
Numerous opinions were also raised regarding single homes jointly owned by spouses. Since the supplementary real estate tax is assessed on a per-individual basis, it was pointed out that under this reform plan, a single home jointly owned by a couple would be treated as a multi-home situation.
However, the Ministry of Economy and Finance maintains that such claims are factually incorrect. The ministry explains that spouses jointly owning a single home can choose between individual taxation or the special exemption for one household with one home, allowing taxpayers to select the more favorable tax treatment.
A Ministry of Economy and Finance official stated, "When assessing the supplementary real estate tax, spouses jointly owning a single home are treated as ordinary single-homeowners and not as multi-homeowners. Even under the reform plan, applications for and application of the special exemption for one household with one home remain possible according to the taxpayer's will, just as they are now."
Additionally, negative opinions persist regarding other measures, such as the long-term holding special deduction for housing capital gains tax, which sets deduction limits incrementally up to 1 trillion won.
Song Young-gil, a candidate for leader of the Democratic Party of Korea, appeared on KBS Radio and said, "My view is that we should not touch real estate taxes. Even if we adjust the one-household-one-home rule, supplementary real estate tax, and capital gains tax, we might only collect an additional 1 trillion won. Yet the potential additional revenue is 50 trillion won—why risk everything for just 1 trillion won?"
Tax reforms related to capital markets have also become unavoidable to correct course. President Lee Jae-myung instructed on the 8th a full review of the tax reform plan concerning ISA (Individual Comprehensive Asset Management Accounts) and the so-called 'Stock Price Suppression Prevention Law.'
This tax reform plan included provisions that would reduce benefits for existing ISAs while introducing a new type of ISA, known as 'productive finance ISA,' which allows investment only in domestic companies. Regarding the Stock Price Suppression Prevention Law, critics have pointed out that its scope of application is narrow and it contains numerous loopholes.
It is rare for the Ministry of Economy and Finance to revise government tax proposals before submitting them to the National Assembly. While various pro and con opinions on tax reform plans are raised annually, the ministry typically sticks to its original proposal, with revisions usually discussed within the National Assembly.
Of course, last year there was an instance where the government attempted to change the criteria for major shareholders subject to capital gains tax on listed stocks but withdrew the plan after facing public opposition. In that case, however, the decision to withdraw came after the tax reform plan had been submitted to the National Assembly, and the matter withdrawn involved only amendments to enforcement decrees that did not require legislative changes.
Vice Prime Minister and Minister of Economy and Finance Koo Yoon-cheol stated at a State Council meeting on the 11th, "We will listen fully to public opinions during the comment period ending on the 20th, make necessary revisions, and submit the finalized plan to the National Assembly to ensure its completeness."
in ECONOMY
