Government Extends Tax Exempt Clauses

The expiration dates of 10 non-taxation and exemption clauses for ordinary citizens, the self-employed running small businesses, and small- and mid-sized venture businesses, will be extended from the end of this year to 2-3 years later.

To be pursued are lowering the acquisition registration taxes—2.5 percent of actual transaction prices when purchasing existing houses and 4.0 percent when being distributed new apartment units—within the second half of this year and scrapping the total equity investment regulations within this year.

In a meeting presided over by Prime Minister Han Myeong-sook to examine the economy and livelihood of ordinary citizens held on July 6 at the Government Central Complex in Sejongno, Jongno-gu, Seoul, the government finalized the “directions for economic management in the second half” with items mentioned above as its outlines.

In the meeting, the government decided that the focus of direction for economic management in the second half will be job creation through sustained economic recovery and investment facilitation. This means its policy directions, which have been centered on social welfare and shared growth, will drastically change to economic stimulation and deregulation.

For the goal of economic stimulation, the government decided to operate a deficit budget by injecting 88 trillion won in the second half, an increase of 20 trillion won from the same period last year.

According to the “directions for economic management,” 10 non-taxation and exemption measures set to be expired at the end of this year—exemption of taxes on small-sized business startups, non-taxation of income taxes on housing subsidies, and tax deduction on income increments of the self-employed to name a few—will be extended by 2-3 years.

The government reflected much of what large and small-sized businesses have asked for; repealing the total equity investment limits within this year will be pursued, and businesses will be allowed to get trade finance aid with only approvals of purchases.

In an effort to boost the construction sector, the government will push for enterprise cities, innovation cities and private-financed projects without delay and designate two or three reorganization promotion zones in the northern areas of Seoul by September.

It also allowed parents to get income deductions on education expenses when their pre-school children take taekwondo or swimming classes for over a certain period.

Economic experts said the policy changes have considerable positive aspects, but they were still concerned about possible aggravation of government finance due to increased deficits.

Hyun-Jin Park witness@donga.com legman@donga.com