Ruling party desperately appeals to voters ahead of presidential election

Rep. Park Wan-joo of the ruling Democratic Party of Korea speaks during a meeting at the National Assembly, Tuesday. Yonhap

By Lee Kyung-min

The ruling Democratic Party of Korea (DPK) said Tuesday that it is considering temporarily lowering capital gains taxes on owners of multiple homes, in the latest move of pandering ahead of the presidential election next year. A day earlier, the DPK agreed to a one-year delay in the imposition of taxation on gains from cryptocurrency trading.

The clear shift in stance indicates the degree to which the ruling party is willing to renege on the once-railroaded policy platform, a sad reality of extreme voter cynicism brought on and amplified by real estate policy failures by the Moon Jae-in administration.

Public fury is escalating over this year's tax on owners of expensive and multiple homes with more than one million people paying the "comprehensive real estate tax" on their homes and land. The figure topping 1 million is the first time since the tax is imposed on housing with the officially appraised value of over 1.1 billion won ($933,000) took effect in 2005. The number of people paying the tax soared 38 percent in just a year from 744,100 in 2020.

The tax on homes and land will amount to 8.56 trillion, doubling from last year's 4.26 trillion won. It is a 4.7-fold increase from 1.8 trillion won 2017, when President Moon took office.

Data from Rep. Choo Kyung-ho of the main opposition People Power Party showed the number of residents in Seoul subject to the tax surged in non-southern areas such as Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, and Guro in Seoul, by between a range of 1,000 and 4,000.

Experts say the politically charged declaration of the tax cut will not lead to an immediate and tangible stabilization of the housing market, because trading volume will not increase unless the burden of heavy taxes rapidly accrued over the past few years is somehow mitigated.

Rep. Park Wan-joo, chairman of the ruling party's Policy Committee, said the idea of lowering taxes for owners of two or more homes "is not ruled out."

The comment came in response to a question on whether the party has reached a consensus to shift from the previous stance of "no tax incentives for multiple homeowners."

The sustained slump in the number of homes that are bought and sold is continuing longer than expected, he said, strengthening views that homeowners are not inclined to sell them due to heavy taxes.

Discussions are continuing between lawmakers with differing views on delaying the imposition of heavy capital gains taxes, he added. "Some say the delay is inevitable, whereas others view it as a clear failure in platform consistency. We are collecting opinions from all lawmakers," Park said.

Rep. Kim Sung-whan, the party's vice floor leader, supports a delay. "Many homeowners say their hands are tied, because the rapid increase in tax leaves them unable to sell their houses," he said during a radio interview with MBC, a local broadcaster.

The unified stance is in line with the party's presidential candidate Lee Jae-myung, whose real estate policy drive is defined as raising taxes on people who retain multiple homes, while lowering them for those who buy or sell them.

Myongji University professor of real estate Kwon Dae-jung said the trading volume in the housing market will be determined by the degree of the tax cut.

"Homeowners will have no reason to sell their property unless the tax cut is large enough for them to offset the spike over the past few years," he said. "It is difficult to imagine market stabilization, if the rate decrease is negligible."

Meanwhile, the government has yet to decide on whether to increase the maximum deductible amount from the current 2.5 million won to 50 million won, a level granted to those with investment in stocks.

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