Government Backs Down: How the Tax Revision Plan Was Modified

[Anchor]

The government has ultimately modified the tax reform plan it announced last month. First, it partially withdrew plans to tighten the comprehensive real estate holding tax on single-home non-residents. The basic deduction will be reverted to the current 1.2 billion won from the initial proposal of 900 million won, and the cap on tax burden increases and deductions for couples filing jointly have been eased from the original plan. The government initially tried to stick to its plan under the banner of favoring actual residents, but stepped back after a month of sustained backlash.

For our first story, reporter Lee Seong-hoon has the details.

[Reporter]

The government has decided to maintain the current 1.2 billion won basic deduction for the comprehensive real estate holding tax on single-home non-residents.

This comes 29 days after the government announced on August 3 that it would lower the threshold to 900 million won.

[Kang Yu-jung / Senior Presidential Spokesperson: "In order to reduce the tax burden gap (between resident and non-resident single-home owners), the basic deduction amount for resident single-home owners will be raised from 1.2 billion won to 1.4 billion won, while the basic deduction amount for non-resident single-home owners will be maintained at its current level of 1.2 billion won."]br />

The plan to raise the cap on the comprehensive real estate holding tax burden from 150 percent of the previous year's property tax to 200 percent has also been withdrawn, keeping it at the current 150 percent.

For single-home non-residents who own property under joint names with their spouses, the deduction—which was to be reduced to 400 million won per person—has been raised to 600 million won, bringing the total combined deduction for couples to 1.2 billion won.

However, this is still lower than the current combined deduction of 1.8 billion won for couples.

Consequently, the property tax burden for next year will also be lower than originally outlined in the reform plan.

Assuming an apartment in Seocho-gu, Seoul, with an officially assessed price of 3.5 billion won is held as a single-home by a non-resident under a single name, the holding tax comes to 26.41 million won, which is 6.77 million won less than the original proposal.

For jointly owned properties by couples, the tax is calculated to decrease by about 5 million won, dropping from 21.84 million won to 16.84 million won.

[Woo Byung-tak / Senior Specialist at Shinhan Premier Pathfinder: "Given that the basic deduction for a single-home under a single name was originally 1.2 billion won, this brings it back to the same level, which significantly alleviates the disadvantages imposed on non-residents..."]

As the gap in deduction amounts between residents and non-residents has narrowed significantly compared to the initial plan, the government's much-touted principle of prioritizing actual residents in the reform has been largely undermined.

The government explained that it revised the final plan by reflecting opinions raised during the legislative notice period and inter-ministry consultations.

The final plan will be submitted to the National Assembly by the day after tomorrow (September 3) and will then undergo review during the regular parliamentary session.

(Photo, video coverage: Jung Sang-bo, Yoon Hyung | Video editing: Kim Ho-jin)

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