Major Cut in Real Estate Tax Scheduled

The threshold of the comprehensive real estate tax will be raised next year to 900 million won from 600 million won.

The tax rate will be lowered to the range of 0.5 to one percent from that of one to three percent. Tax imposed on senior homeowners aged 60 or over will be reduced 10-30 percent.

If the changes are approved, the number of those paying the comprehensive real estate tax will be less than half of last year’s 379,000. At the same time, the tax burden on senior citizens will be significantly reduced.

The government and the ruling Grand National Party announced the moves in a policy consultation meeting yesterday attended by party chief policymaker Yim Tae-hee, the National Assembly’s Strategy and Finance Committee Chairman Seo Byeong-su and Strategy and Finance Minister Kang Man-soo.

Most of all, the government and the party agreed to raise the threshold of the comprehensive property tax, whose benchmark of 600 million won had been used before the announcement of real estate policies on Aug. 31, 2005. By doing so, the government is trying to quell the controversy over a "tax bomb."

Under the new rules, the government will lower the tax base and cut the top tax rate by two-thirds.

The tax base and rate are divided into four stages: one percent for houses priced under 300 million won; 1.5 percent for those priced above 300 million won and lower than 1.4 billion won; two percent for houses going for between 1.4 billion and 9.4 billion won; and three percent for homes priced more than 9.4 billion won.

The tax base and rate, however, will be divided into three stages: 0.5 percent for houses cheaper than 600 million won; 0.75 percent for those priced between 600 million and 1.2 billion won; and one percent for those priced above 1.2 billion won.

Senior citizens will be given the following tax benefits: 10 percent off for those between ages 60 and 65; 20 percent for those between 65 and 70; and 30 percent for those aged above 70.

New measures will also ease the tax burden on industrial land, including land attached to buildings.

The majority of experts say, however, that the revision of these rules will make a limited impact on the economy through boosting domestic markets such as that of real estate.

Over the long term, the revision is expected to help restore consumer confidence of the rich and improve the service balance account.

The government is expected to face strong resistance from opposition parties, which say the tax changes are designed for the rich.

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