Yoon Criticized for Series of Policy Blunders
By Lee Hyo-sik
Staff Reporter
Senior policymakers are flip-flopping on major policy issues these days, inviting strong protest from businesses and consumers who act on the words of government officials.
They're on the verge of losing policy credibility from the public, and at the center of the mess is Strategy and Finance Minister Yoon Jeung-hyun, who took the helm of the top economic policymaking body early February and vowed not to repeat policy blunders made by his predecessor, Kang Man-soo.
While in office for a year, Kang faced constant criticism for a series of incoherent foreign exchanges and other economic policies, completely losing market confidence.
When Yoon formed the new economic team with Financial Services Commission (FSC) Chairman Chin Dong-soo and Senior Presidential Secretary for Economic Affairs Yoon Jin-shik, he pledged to relax regulations on the real estate market, including slashing capital gains tax rates.
On March 16, the finance minister unveiled a measure to ease the capital gains tax regime, allowing multiple homeowners to pay less tax when selling their homes in an effort to encourage people to purchase more homes and boost demand amid the slumping housing market.
At the time, those who owned two units were required to pay 50 percent of capital gains as taxes when selling the first unit. But when upon unloading the remaining unit, they were subject to capital gains tax rates ranging from 9 percent to 36 percent, depending on how long they owned it and resided there.
As for people holding three homes, they were subject to 60 percent capital gains tax rates when selling first units, 50 percent taxes for second units and between 9 to 36 percent for final units.
After the scrapping of the punitive capital gains tax regime targeting multiple homeowners, they would pay taxes of between 9 to 36 percent, as owners of single homes do.
Yoon said people selling homes beginning from the day the step was announced would be entitled to lower capital gains taxes. Many homeowners have disposed of their units on the finance minister's words over the past month.
However, the finance ministry is now saying that the easing of the capital gains tax scheme will not likely go into effect in the face of opposition from the governing Grand National Party (GNP), wreaking havoc on those who sold homes on the promise of lower capital gains taxes.
Even Yoon himself said recently that he did not expect objection from the GNP, saying he thought he had an agreement with party officials when it was made public. But such remarks are seen as irresponsible and some are even calling on the government to compensate people who sold homes on the words of public officials.
Additionally, Yoon has repeatedly said that the government will remove affluent southern Seoul areas from property speculation zones to prop up the sluggish real estate market.
However, Vice Strategy and Finance Minister Hur Kyung-wook and other finance ministry officials have refuted Yoon's remarks, saying it could fan property speculation. These conflicting remarks among senior ministry officials have sent confusing signals to the market, further freezing the already frozen real estate sector.
Yoon and his finance ministry are also at the center of a controversy regarding the provision of subsidies to buyers of new cars.
Late last month, the Ministry of Knowledge Economy said it will enact the new auto tax cut in an effort to facilitate domestic demand and help local carmakers weather the global economic downturn.
Under the temporary measure, buyers of new cars will enjoy up to 2.5 million won in tax cuts, or 70 percent of all vehicle taxes, including the special excise, registration and acquisition taxes.
The beneficiaries will be the 5.5 million drivers who registered their current vehicles before 2000, or 32.6 percent of all registered cars in the country.
But several days later, a senior finance ministry official said if labor and management relations improve, the government may stop offering the subsidies, confusing car buyers over whom they should believe among government agencies.
Such policy confusion has further discouraged potential car buyers to take a wait-and-see attitude and worsened the bottom line of automakers.