District Governments’ Authority to Cut Property Tax Rate Weakened

The government and the ruling party have decided to reduce the authority of autonomous districts to cut property tax rate, causing controversy.

“Autonomous districts can cut the property tax rate set by the government up to 50 percent through their tax rate adjustment process,” said Uri Party chief policymaker Jeong Se-kyun. “However, the power can be abused or misused as we have recently seen in Gangnam-gu, Seoul.”

The Uri Party is planning to put forward and pass the revision of the local tax law at the regular session of the National Assembly this fall. If it is passed, the ceiling of the adjustment will fall to 30 percent. The Ministry of Government Administration and Home Affairs is also preparing to reduce the adjustment authority of district governments.

Opposing to the government’s decision to raise property tax, the Gangnam-gu assembly unanimously passed a bylaw on May 3 that lowers the tax rate by 50 percent.

“The decision made by Gangnam-gu could be a stumbling block to the government policies of real estate and fair taxation,” said Mr. Jeong. “In the long run, we will review revising items of taxation in order to change the property tax, which is now a local tax, to a national tax.”

He added that in case of Seoul which faces higher property tax raise, the property tax could be converted into Seoul Metropolitan Government tax and be distributed to district governments.

“The district has cut the property tax rate in order to ease tax resistance,” criticized Lee Han-gu, chief policymaker of the opposition Grand National Party. “It is absurd for the ruling party to intervene in the local government’s decision, saying its policies are not in line with the government’s.”

Seung-Heon Lee ddr@donga.com