Democratic Party of Korea leader Kim Min-seok on Sunday reiterated his position that unavoidable reasons for non-residency among single-home owners who do not live in their property should be recognized broadly, and that any move to increase the burden of the comprehensive real estate tax and capital gains tax should be approached with caution.

As the government considers expanding non-residency exemptions, the ruling party has gone further by raising the need to supplement the broader tax reform package, drawing attention to how much the overhaul may be adjusted during the National Assembly review process.

A visitor looks out over apartment complexes in Gangnam from the Eungbongsan observatory in Seongdong-gu, Seoul. [Photo by Lim Se-jun]
A visitor looks out over apartment complexes in Gangnam from the Eungbongsan observatory in Seongdong-gu, Seoul. [Photo by Lim Se-jun]

Speaking at a senior ruling party-government consultative meeting held at the prime minister's Seoul residence in Samcheong-dong on Sunday, Kim said he broadly agreed with the government and the president's direction on expanding real estate supply and reforming the tax system, but offered several suggestions for improvement. "For single-home owners who do not reside in their property, the various unavoidable real-life reasons for non-residency must be recognized broadly, with no blind spots left unaddressed," he said.

Kim also called for careful deliberation on the comprehensive real estate tax reform. "Even under the current system, non-residents already face a natural increase in their tax burden as publicly assessed home values rise," he said. "Deep deliberation is needed on the proposed reform that would lower the basic deduction threshold for the comprehensive real estate tax on non-resident single-home owners from 1.2 billion won ($861,000) to 900 million won, and raise the tax burden cap to 200 percent."

On the reform of the long-term holding special deduction for capital gains tax, Kim said the shift from a long-term holding deduction to a long-term residency income deduction had merit as a policy aimed at promoting owner-occupied housing. He warned, however, that the cascading effects of the change needed careful scrutiny to ensure they did not have a negative impact on the jeonse and monthly rent market.

The remarks reiterated a position Kim had expressed through SNS on Aug. 14. At the time, he said he agreed with the government's overall direction on tax reform but warned that reducing the long-term holding special deduction for capital gains tax on non-resident single-home owners could amount to a de facto tax hike and could also affect the jeonse and monthly rent market.

On the comprehensive real estate tax, Kim similarly expressed caution about reducing the basic deduction for non-residents, noting that their tax burden was already rising naturally due to increases in publicly assessed home values.

The government has also left open the possibility of expanding the list of recognized non-residency exemptions. Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol told the National Assembly's finance and economy committee on Thursday that there had been a large volume of public requests during the legislative notice period. "There were a great many calls to expand the recognized grounds for non-residency," Koo said.

Koo said reasonable grounds such as schooling and overseas study would continue to be recognized. "However, if a situation qualifies as an unavoidable reason for non-residency during the implementation process, we will ensure that the public faces no inconvenience in those cases," he added.

Under the government's proposal, recognized grounds for non-residency include enrollment in school, job changes or transfers, illness or medical care, school transfers due to school violence, overseas stays, and cohabitation to care for a direct-line ascendant. Non-residency periods of up to three years may be counted as residency periods, but only when the owner has lived in the home for at least one year before relocating to another city or county for unavoidable reasons.

The government plans to review public comments received during the legislative notice period, submit the revised bill to a Cabinet meeting on Sept. 1 and present it to the National Assembly on Sept. 3.

Meanwhile, Kim also stressed the need to expand housing supply. "The key to residential stability is, above all else, expanding supply," he said, calling for the mobilization of every available means to secure land and increase real estate supply on all fronts.

He added that the ruling party would fulfill its legislative responsibilities as the party in power by streamlining permit and approval procedures and dismantling various regulations to accelerate the expansion of real estate supply.


y2k@heraldcorp.com