The Democratic Party has moved to revise the government's tax overhaul as public opposition intensifies, focusing on real estate provisions such as residency exemption requirements and the long-term holding special deduction.
The party said it will gather input from stakeholders by the end of this month and prepare measures, and will also review financial and stock market provisions that drew strong internal criticism — including the Individual Savings Account (ISA) and the government's anti-share-price-suppression plan — to align them with their original intent.
"There is the government's tax overhaul that has been made public, and stakeholders are voicing various views on the current plan," Han Jeong-ae, chair of the party's Policy Committee, said at a policy meeting at the National Assembly on the 9th. "There is a possibility the overhaul will be finalized around the end of August." To coordinate the revisions, the party expanded its existing housing market stability task force, which had focused on housing supply, so that the relevant standing committees — Public Administration and Security, Economy and Finance, Land, Infrastructure and Transport, and National Policy — can take part.
The party launched its formal input-gathering effort because the backlash against the tax overhaul has been considerable. According to the Ministry of Government Legislation's public participation legislation center, the amendment to the Comprehensive Real Estate Tax Act, put up for public notice on the 4th, drew 2,661 comments in five days (as of 9 p.m.). An amendment to the Income Tax Act, which would convert the special deduction for capital gains tax on long-term holdings into a deduction for long-term residence income, received 1,737 comments. In particular, there were many demands to expand the residency requirement for owners of a single home who do not live in it, and an amendment to the Restriction of Special Taxation Act related to the ISA overhaul drew 343 comments.
The party plans to concentrate on reworking the criteria for recognizing residency in response to such proposals. Because the overhaul sharply reduces tax benefits for owners of a single home who do not live in it, the goal is to compile unavoidable exceptions and revise the bill reasonably. Under the current government plan, when a resident who has lived continuously in a home for at least one year moves to another city or county for unavoidable reasons — such as schooling, a job change or transfer, illness, a child's transfer to another school, a stay abroad, or caring for parents — up to three years of non-residence is recognized as residence.
But as requests pour in for additional exceptions — non-residence due to child-rearing or family caregiving, or temporary non-residence for remodeling — the party is preparing a revision that can encompass them. "We plan to prepare the amendment so that each case is written into law but can be interpreted in line with its direction," Democratic Party lawmaker Kim Nam-geun said.
The abolition of the long-term holding deduction is also likely to come under scrutiny. There have been continued arguments that completely abolishing the holding deduction — created to prevent taxation on natural inflation-driven price increases — could infringe on property rights. "We are gathering the various views being raised, and lawmakers in Seoul districts are taking this more sensitively," Han said. "We plan to continue the discussion through party-government consultations."
At the meeting, participants also raised the need to transfer part of Seoul City's supply permit authority to enable bold housing supply. With Seoul City currently handling all permits large and small, a bottleneck has emerged, and the view is that authority over smaller permits — set by criteria such as complexes of fewer than 500 units — should be handed to the district offices. "There is a view that Seoul City should set the broad principles and, after being notified of the results of whether the districts acted in line with those principles, request supplements where needed, in order to ease the bottleneck," Han said.
Participants also proposed expanding non-apartment housing built with modular construction as a "housing ladder." "If we provide budget support so that youth housing or non-apartment housing can be built with modular methods, we can significantly move up the supply timeline," Han said. She also apologized over the "youth bus house" controversy set off by Democratic Party lawmaker Hwang Hee: "The situation has unexpectedly hurt young people, and for that part I am sincerely and deeply sorry."
On the ISA, which President Lee Jae-myung recently ordered be reviewed, the party made clear its position that "there is no need to touch existing ISA accounts." The tax overhaul earlier announced by the Ministry of Economy and Finance was designed to limit the carryover of contribution limits on existing ISA accounts and to set maturities, reducing the tax-saving effect available when funds are managed over the long term. "Additional ISAs related to productive finance can be handled selectively," Han added.
The government's anti-share-price-suppression measure, which drew significant concern within the party, is also expected to be reviewed in full. It was drawn up to prevent largest shareholders from artificially lowering a company's share price to reduce inheritance and gift taxes, but critics within the party have argued it could instead serve as a guideline that tells companies how to suppress share prices. "There was an original intent behind the bill, but it is quite lacking," Han said. "The Ministry of Economy and Finance is also leaning toward taking the party's requests and discussing them soon." The party plans to address the flaws in the government plan through forums and other means.
Meanwhile, the Democratic Party's housing market stability task force is set to hold its first meeting this week and begin full-scale activity. The task force includes Han, Oh Ki-hyung, the Economy and Finance Committee secretary; Bok Ki-wang, the Land Committee secretary; Park Sang-hyuk, the National Policy Committee secretary; and Lee Hae-sik, the Public Administration Committee secretary, as well as deputy floor leaders Chun Jun-ho, Kim Han-kyu and Jeon Yong-gi.
