Yoon relies on tax cut drive in bid for breakthrough

An aerial view of Seoul, May 30 / Joint Press Corps

President Yoon Suk Yeol is pursuing real estate and inheritance tax reforms in an effort to address challenges amid low approval ratings, even though the plan will likely face setbacks in the opposition-controlled National Assembly.

According to the presidential office, it is currently considering new reforms to Korea’s real estate and inheritance tax system. This move appears to be aimed at reducing middle class homeowners’ property-related tax burdens given that Seoul has one of the most expensive housing markets in the world.

Housing prices in Seoul were 15.2 times higher than the average annual income in 2022, up from 14.1 times in 2021, according to data by the Ministry of Land, Infrastructure and Transport. In addition, the inheritance tax was seen as having a negative effect on economic growth by preventing smooth family business successions.

Director of National Policy Sung Tae-yoon suggested, Sunday, that a comprehensive real estate holding tax be abolished and proposed a reduction in inheritance tax rates to a maximum of 30 percent during a TV interview with KBS.

“A comprehensive real estate holding tax should be levied only on owners of a single high-value property or multiple-home owners,” Sung said.

Imposed separately from property taxes collected by local governments, the comprehensive real estate holding tax is levied annually by the central government on individuals who own multiple homes with a combined appraisal value exceeding 900 million won ($652,573). The tax is also levied on owners of a single property exceeding 1.2 billion won in value.

“The inheritance tax rate would be reduced to a level comparable to other OECD countries,” Sung added.

In Korea, the inheritance tax rate reaches up to 50 percent, the second-highest rate in the OECD after Japan at 55 percent and far above the OECD average of around 26 percent.

The presidential office announced that a final decision will be made after July after gathering expert opinions.

However, the presidential office’s tax reform proposals face a bumpy road ahead as several other reform moves, including a medical reform, have hit dead ends. Major hospitals are now taking weekly breaks amid a prolonged walkout by trainee doctors. A Gallup Korea opinion survey showed, Monday, that Yoon’s approval rating has been hovering around only 30 percent.

A person walks by a real estate brokerage office in Seoul, June 2. Yonhap

The main opposition Democratic Party of Korea (DPK) criticized the proposals, Monday, denouncing them as being “politically motivated.”

“The government is causing serious fiscal crisis by cutting taxes for supporters of the ruling People Power Party,” DPK spokesperson Rep. Lee Hae-sik said.

“The tax revenue shortfall is an extremely serious issue. The country suffered a 56.4 trillion won tax shortfall last year, and many anticipate this year’s tax shortfall to hit over 30 trillion won. Yet, the Yoon administration is emphasizing fiscal soundness.”

However, some party members remained cautious over the government’s real estate and inheritance tax reform plan. In May, Rep. Park Chan-dae, the floor leader of the DPK, mentioned the need to abolish the comprehensive real estate holding tax.

The Rebuilding Korea Party (RKP) is opposed to the reform proposals.

“Yoon is an incompetent and irresponsible president who is busy favoring the wealthy and hurting the rest,” said Rep. Hwang Un-ha, the floor leader of the RKP.