Although the government has hinted at revising the tax reform plan, uncertainty remains regarding its timing and scope. This is because the matter requires comprehensive review of its potential impact on the real estate market, consistency in government policy, and other factors. Additionally, the fact that the deadline to finalize the government's proposal is approaching adds another variable.
Democratic Party of Korea lawmaker Oh Ki-hyeong stated on the 25th during a broadcast of KBS Radio's "Urgent Current Affairs" program that "(regarding real estate taxation) there is no need to distinguish between primary and non-primary residences." Oh (Rep.) serves as the ruling party's rapporteur for the National Assembly's Finance and Economic Planning Committee, which will review the tax reform plan.
The issue raised by Oh (Rep.) refers to the tax reform plan announced by the Ministry of Economy and Finance on the 3rd. The ministry currently distinguishes between primary residences and non-primary residences regarding the basic deduction amount for comprehensive real estate tax for single-homeowners, which stands at 1.2 billion won. Under this proposal, the deduction would be lowered to 0.9 billion won for non-primary residences and raised to 1.4 billion won for primary residences.
Even among single-homeowners, the basic deduction amount varies depending on whether the property is used as a residence. Since the comprehensive real estate tax is calculated by subtracting the basic deduction from the assessed value, then multiplying by the fair market value ratio and tax rate, a reduction in the basic deduction leads to an increased tax burden.
Exceptions are recognized even for non-primary residences under unavoidable circumstances. These include cases involving school transfers, enrollment, or illness. Additionally, the tax reform plan includes a proposal to raise the cap on comprehensive real estate tax liability from the current 150% to 200%.
The Democratic Party has formally requested revisions to this section. During the high-level party-government coordination meeting held on the 23rd, discussions included broadly recognizing exceptions for non-primary single-homeowners, adjusting the basic deduction for comprehensive real estate tax applicable to non-primary single-homeowners, and re-examining the cap on comprehensive real estate tax liability.
Oh (Rep.) stated, "I believe the government will be considering whether to unify the basic deduction at 1.2 billion won or 1.4 billion won, or simply ensure it is not more disadvantageous than the current system," and added, "Let's maintain the cap on tax liability."
Even if the Ministry of Economy and Finance accepts the Democratic Party's request, whether the revised proposal will be submitted to the State Council remains a separate issue. This is because procedures such as Wi Hae-seon (Vice Minister) meetings must be completed before submission to the State Council, and time is tight.
Therefore, another possibility being discussed is submitting the original plan to the State Council as-is, with the Ministry of Economy and Finance later presenting its revised position during regular National Assembly deliberations.
Conversely, expanding exceptions for non-primary residences is expected to be a relatively straightforward revision. This matter involves amending the Enforcement Decree rather than requiring legislative changes. Therefore, independent of National Assembly deliberation procedures, the government can revise it at any time based solely on its will. The Ministry of Economy and Finance has also kept various options open.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol stated during his appearance before the National Assembly's Budget and Accounts Special Committee on the 24th that "we intend to boldly convert reasonable non-primary residence cases into primary residences to resolve the issue."
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