By Kim Tae-gyu
Staff Reporter
The government plans to provide tax deductions for companies instituting job sharing, and exempt or cut capital gains tax for people who buy new houses this year in Incheon and Gyeonggi Province as part of efforts to deal with the ongoing financial crisis.
During consultations with the Grand National Party, Thursday, the Ministry of Finance and Strategy (MOSF) came up with the plan, aimed at helping struggling constructors and curbing asset deflation.
The package also features tax benefits for companies, which maintain jobs through cutting salaries. Taxes charged on retirement allowances will also be slashed this year.
``Basically, those who buy homes smaller than 149 square meters this year in Gyeonggi Province will be exempted from capital gains tax if they dispose of the homes within the next five years,'' an MOSF official said.
``If the houses are situated in Incheon or over-crowded areas in Gyeonggi, their tax burden will be halved. We hope the steps will help construction firms,'' he said.
Included in the over-crowded areas are Guri, Namyangju, Hanam, Goyang, Suwon, Seongnam, Anyang, Bucheon, Gwangmyeong, Uiwang, Siheung and Uijeongbu.
Seoul and other areas are excluded and those who have multiple homes will not enjoy the benefits.
Taxes charged on retirement allowances will be cut for company employees excluding executives. Firms that maintain jobs through cutting payrolls would also get tax benefits.
The policies received a mixed response.
``Exemption of capital gains tax will prop up housing prices over the long haul. In the short run, however, its effect will be limited,'' said a Seoul analyst, who declined to be named.
``I am afraid the measures will anger residents of other areas where asset deflation is severe,'' he said. In addition, the government will abolish the upper ceiling on prices for new apartments in a move to encourage construction.
Additionally, the government plans to offer a total of 64.3 trillion won ($45.8 billion) in credit guarantees to small- and medium-sized companies to tackle the lingering global credit crunch.
President Lee Myung-bak approved the plan Thursday during an emergency meeting in the ``economic war room,'' an underground bunker at Cheong Wae Dae.
``State-run credit insurers will roll over all their guarantees on bank loans that mature this year, amounting to 34 trillion won,'' Financial Services Commission (FSC) Chairman Chin Dong-soo, who took part in the meeting, said.
``In addition, they will extend fresh assurances of 30.3 trillion won throughout the year to help cash-strapped companies. Hence, the total will stand at 64.3 trillion won, up from 46.3 trillion won in 2008,'' Chin said.
Included in the credit insurers are the Kibo Technology Fund, the Korea Credit Guarantee Fund and the Korea Export Insurance Corp., which mainly support small-sized companies.
The criteria in deciding beneficiaries of the credit guarantees will be eased this year, while the upper limit available will be substantially enhanced.
Exporters, start-ups and firms in low-carbon emission industries will be able to get 100 percent guarantees on bank loans if they meet a set of minimum requirements.
In particular, the temporary system for 2009 will exempt workers at credit insurers from liability as long as they stick to the guidelines.
``We are asking banks not to screen companies once again if they are fully guaranteed, as they will not suffer any losses even if potential debtors collapse,'' Chin said.
``We will check every week whether or not banks provide loans to companies whose debts are covered by the guarantee,'' the nation's top financial policymaker said.