By Lee Hyo-sik
Staff Reporter
The nation's top economic policymaker said Monday that taxation is not an effective policy tool to stabilize the real estate market, reiterating the government's intent to ease the property-related tax regime to boost transactions and lessen the tax burden on households amid falling home prices.
Strategy and Finance Minister Kang Man-soo told lawmakers that taxes should only be used as a tool to collect government revenues to finance a range of fiscal activities, pointing a finger at the previous Roh Moo-hyun administration for the creation of a market-unfriendly and heavy-handed real estate tax regime aimed at curbing rises in home prices mainly in southern Seoul.
``The real estate market cannot be stabilized through taxation,'' he stressed.
Kang also said now is the time for the government to consider cutting capital gains taxes for those who have owned one house for a long period of time to revitalize home transactions.
The governing Grand National Party (GNP)'s chief policymaker Lim Tae-hee said Sunday that the party will soon lower capital gains taxes for people owning a single home, adding it will discuss how to ease the all-inclusive property tax regime at the National Assembly in September.
Last week, Rep. Lee Jong-koo of the GNP initiated a bill to raise the ceiling of the all-inclusive real estate tax to 900 million won from the current 600 million to further reduce the tax burden on homeowners.
Minister Kang also said consumer price growth will likely exceed 5 percent this month as a result of high oil and other imported commodity prices. ``Even though crude prices have headed downward in recent weeks, the lower costs will be reflected in consumer prices several months later, not now,'' he said, adding prices of goods and services here will likely remain high in the second half of the year.
Consumer prices rose 5.5 percent in June from a year earlier, up from a 4.9 percent gain the previous month. The increase was the highest since November 1998 when prices jumped 6.8 percent.
The cost of living index, consisting of food and other daily necessities, jumped 7 percent from a year ago, meaning that consumers felt the inflation burden more heavily than the overall price increase.
The government expects prices to rise 4.5 percent this year, up from its initial forecast of 3.3 percent, while the central bank said the inflation rate will reach 4.8 percent in 2008 year-on-year. But most private analysts project that consumer prices will grow over 5 percent.