Biz-purpose Land to Get Big Tax Break

The comprehensive real estate tax for land owned by companies for business purposes could get lifted or cut, a member of the presidential transition committee said yesterday.

The intent is to reduce the burden on businesses and encourage their investment.

The tax was introduced to cool property inflation, as land for business purposes does not fall under the description of “overheated real estate market,” the committee said. Instead, the tax is posing as a serious obstacle to corporate competitiveness and investment drive.

The amount of the comprehensive real estate tax reached an estimated 533.4 billion won last year, up from 489.5 billion from 2006 and 361.5 billion from 2005.

The Korea Chamber of Commerce and Industry recently suggested removing or cutting the tax to the committee.

“Certain companies are forced to pay billions more in taxes when their revenue is shrinking due to increasing land prices,” said the committee member. “Gains from higher land prices can be collected through a capital gains tax when the company sells the property. A separate tax on business purpose-land is redundant.”

Another new business-friendly measure is to cut red tape in creating an industrial complex, which now takes at least three years because of all the required approval and licenses. A task force comprising state agencies and provincial governments will simplify the process.

“In 2000, we had 7,128 regulations needing government approval or license, and the number jumped to 8,084 at the end of last year,” said South Chungcheong Province Governor Lee Wan-koo. “Every new administration pledged deregulation but did not keep its promise and regulations grew in number.”

The committee said each provincial government should do the following to form an industrial park: plan for and request designation (seven months); collect residents’ opinions (two months); adjust urban management plans from authorities (three months); notify designation (one month); prepare documentation about the expected impact (16 months); execute planning (three months); and approve the execution plan (one month).

Committee spokesman Lee Dong-gwan also hinted at deregulation in the culture sector. He said, “Cultural asset protection poses a serious hurdle. Changing agricultural land into industrial land requires too many rigorous regulations. The environmental effect assessment alone takes more than 550 days.”

koh@donga.com