[Editorial] No More Backsliding After the Comprehensive Real Estate Tax U-Turn in 29 Days

The government has decided to withdraw its plan to lower the basic deduction for the comprehensive real estate tax for non-resident single-home owners to 900 million won, opting instead to maintain the current level of 1.2 billion won. This policy reversal comes just 29 days after the government announced a tax reform proposal that aimed to increase the tax burden for non-residents. Whether 900 million won is an appropriate threshold, and how to protect individuals who are unavoidably unable to live in their own homes, are both valid topics for discussion. It is only natural to accept reasonable proposals to address policy loopholes. However, when such a major pillar of the reform is changed, the government has a responsibility to explain to the public why its decision has shifted.

Fortunately, the policy direction favoring actual residents has been retained. As originally planned, the basic deduction for resident single-home owners will be raised from 1.2 billion won to 1.4 billion won, creating a difference of 200 million won compared to non-residents. The long-term holding special deduction for capital gains tax also continues to be based more heavily on the period of residence. However, as the deduction gap has been reduced from the initially proposed 500 million won to just 200 million won, the principle of “normalizing the tax burden for non-resident ownership”—which aims to protect those who own homes for residential purposes while imposing a commensurate burden on non-resident owners—has been significantly weakened.

The government’s back-and-forth between sticking to the original plan and making revisions has set an unfortunate precedent. It created the impression in the market that political opposition is more important than policy philosophy. If the pattern of making an announcement, holding out, and then retreating in the face of mounting opposition becomes entrenched, it will become even more difficult to pursue necessary reforms in the future.

The key issue now is the National Assembly’s review. Discussions are needed to provide relief for cases in which non-residents are unfairly affected, and to ease the impact of sudden increases in the tax burden. However, if the remaining 200 million won difference is further reduced or eliminated, it will be difficult to avoid criticisms that the very principle of “distinguishing between actual residence and mere property holding for tax purposes” has become hollow. The core aim of this reform was to rationalize taxation by considering not only the formal status of being a single-home owner, but also whether the owner actually resides in the home, the asset’s value, and the owner’s ability to pay. Policy flexibility is important, but the underlying principles must not become mere bargaining chips in negotiations. The National Assembly must not allow repeated concessions to erode the guiding philosophy of the reform.

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