Defuse Tax Bomb

It's Urgent to Ease Single Home Owners' Burden

We welcome the government's move to mitigate tax burdens for owners of a single home. The move comes as homeowners are strongly complaining about higher tax bills for their apartments and houses even though prices are on the decline. Property taxes climbed by an average of 18.7 percent this year from the previous year, far higher than the 4-6 percent inflation rate of recent months. In particular, Seoul residents are much angrier at what they call a ``tax bomb," because their property tax skyrocketed 28 percent on average.

It is regrettable that many single home owners have been trapped in the snowballing tax burden due to the previous Roh Moo-hyun government's attempt to curb property speculation by imposing heavier taxes on landlords. Roh's anti-speculation policy was designed to target those buying homes for speculative purposes. However, the tax hikes hit not only long-term owners of one home, but also those possessing two or more houses.

The tax problem is now posed as a time bomb as additional tax bills will be issued in December to owners of houses and apartments whose prices are higher than 600 million won ($599,000). The tax burden is reaching intolerable levels for homeowners. They have little means to fill the tax bills. Many want to dispose of their properties to avoid taxes. But they cannot do so because of much higher capital gains taxes.

Well recognizing the grievance of the people, President Lee Myung-bak of the conservative Grand National Party (GNP) promised to lower the property tax burden in his campaign platform last year. But it is disappointing that the government and the party have yet to make good on the pledge even though five months have passed since Lee's inauguration. Policymakers should immediately take action to ease the tax burden, or face strong resistance from homeowners.

Roh's tax policy proved to be a total failure. Even his policymakers and his party lawmakers are now calling for a cut in property taxes and capital gains taxes. They belatedly admitted to the policy blunders of the former liberal president who has been blamed for turning the country into the ``Tax Republic of Korea." Even in this situation, how can the Lee administration drag its feet on the urgent task of cutting taxes?

South Koreans paid an average of 28.7 percent of their income for taxes and contributions to national health insurance and pension last year. The figure was up from 26.8 percent in 2006 and 24.6 percent in 2004. The government collected 14.2 trillion more taxes in 2007 than its target. Middle- and low-income earners are increasingly worried about the soaring tax burden. Their pains are all the more piercing amid runaway inflation and the sagging economy.

Prime Minister Han Seung-soo said during an interpellation at the National Assembly on Wednesday that it is necessary to cut property taxes. Strategy and Finance Minister Kang Man-soo also said the government's policy direction is to ease the tax burden for long-term owners of only one home as long as it does not run the risk of stoking speculation. Don't waste time to relieve people's pain.