The Democratic Party leans toward easing 종부세 and capital gains tax despite no final decision... 종부세 applies to the top 2% by official property value

[Asia Economy Reporter Oh Ju-yeon] The Democratic Party of Korea proposed a plan to levy comprehensive real estate tax (종부세) only on the top 2% of individuals based on official land prices. However, since there were sharp disagreements within the party regarding both capital gains tax and 종부세, the party could not finalize its stance on this real estate reform plan and decided to revisit the discussion after consultations through public hearings next month.

On the 27th, the Democratic Party’s Special Committee on Real Estate (Real Estate Special Committee) presented a proposal to impose 종부세 only on the top 2% based on official land prices.

The committee explained that the current 종부세 threshold (900 million KRW) was introduced in 2009, and since then, inflation and housing price increases have surged, causing the number of apartment units with official prices exceeding 900 million KRW to increase more than sixfold compared to 2009. They added that while the target population was 0.6% in 2009, it has reached 3.7% this year. According to estimates by the Budget Policy Office, if the current standard is maintained, the 종부세 amount on housing is expected to increase by 206-234% year-on-year (from 1.8 trillion KRW in 2020 to 5.6-6.1 trillion KRW in 2021), and the number of taxpayers is expected to increase by 17-28%. This means the number of taxpayers will rise from 670,000 last year to between 780,000 and 860,000 this year.

The committee proposed taxing 종부세 on the top 2% of individuals based on official land prices to enhance tax fairness for high-value real estate owners, in line with the original purpose of 종부세 as a wealth tax.

The committee explained that using a percentage-based criterion rather than raising the price threshold would prevent debates over the appropriateness of deduction standards amid future housing price fluctuations and would increase public acceptance by limiting taxation to a small number of excessive real estate holders.

However, the government suggested maintaining the current deduction amount standards while introducing supplementary measures to partially ease the tax burden, but no agreement was reached. The government’s proposal included △introducing a payment deferral system △freezing the fair market value ratio at 90% △establishing a new deduction for long-term residence of over 10 years.

The Democratic Party stated, "The Special Committee’s proposal is a comprehensive reform of the current tax system, and since coordination with the government is necessary, we will prepare a final plan after consulting with the government and experts through public hearings and other means."

This content was produced with the assistance of AI translation services.