Tax resistance

'Bus housing' idea sparks anger as tax overhaul plan provokes backlash

Hwang Hee, a three-term lawmaker from the ruling Democratic Party of Korea, on Friday proposed a plan to convert scrapped buses into housing for young people.

This is nothing short of an absurd idea and an insult to young people struggling to find a home.

The proposal sparked an angry backlash among young people and on online communities, with critics denouncing it as an out-of-touch idea that ignores the harsh realities young people face. "Are young people homeless or refugees?" and "Why don't you go live there yourself first?" were among the comments.

The government's recently announced plan to overhaul the real estate tax system next year is also facing a strong backlash from the market.

Since the legislation was announced for public comment on Aug. 4, around 1,000 public comments a day have been pouring into the Ministry of Government Legislation's online public opinion portal.

Many people are voicing their anger over policies that would impose punitive taxes not only on non-resident homeowners, but even on single-home owner-occupiers and elderly homeowners with only one property and no income.

The backlash is particularly pronounced among retirees in Seoul's high-priced Gangnam area, who would be hit hardest by the tax overhaul. This is because they face a heavier property tax burden on expensive homes, while being slapped with huge capital gains taxes if they try to sell.

For some high-priced homes, annual property taxes could soar by tens of millions of won almost overnight. For elderly retirees who bought their homes at relatively affordable prices 20 to 30 years ago, such a tax burden is simply unaffordable.

But they will also face hefty taxes if they sell. Currently, homeowners who have owned a property for at least 10 years and meet the residency requirement can receive a deduction of up to 80 percent on their capital gains, with no limit on the amount that can be deducted. But if the reform plan takes effect, the deduction on the gains will be capped at 2 billion won (US$1.4 million) in 2028 and 1 billion won from 2029.

It is hard to dispute the criticism that the policy effectively penalizes those who have lived in the same home for a long time.

As a conciliatory measure, the government has offered to reduce capital gains taxes for single-home owners aged 65 or older who sell homes in the Seoul metropolitan area after living in them for at least five years and move outside the capital area.

But that has also drawn a critical response. Those affected ask whether it is really appropriate to pressure them to leave Seoul and move to unfamiliar parts of the country simply because they have an expensive home.

It is hard to justify a policy that suddenly hikes taxes severalfold while restricting people's freedom to choose where to live.

There is also strong public dissatisfaction with the taxation of nonresident homeowners, which fails to take into account people's diverse circumstances. It is hard to dismiss the complaints from people asking, "Am I really being treated as a speculator just because I temporarily moved near my parents for the sake of my child?"

Most nonresident single-home owners, let alone resident homeowners, are ordinary people not involved in real estate speculation. People should not be branded as such simply because the value of their homes has risen or because they do not live in the homes they own.

Renters are worried about eviction and rising rents. This is because single-home owners who do not live in their homes could ask tenants to leave and move in themselves to avoid punitive taxes.

The strong resistance to the tax measures is evidence that the government has taken the wrong approach to tax reform from the outset.

The Democratic Party of Korea says it will coordinate with the government. The possibility of going back to the drawing board should not be ruled out.

(END)

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