Housing Transaction Tax to Be Reduced 1%p

The presidential transition committee announced yesterday to gradually reduce the tax levied on the acquisition and registration of housing by one percentage point.

Currently, homes smaller than 85 square meters have an acquisition and registration tax of 2.2 percent of the transaction cost. Homes larger than the 85 square meters have a similar tax equal to 2.7 percent of the transaction cost.

According to presidential committee spokesman Lee Dong-gwan, based on the testimony from the home affairs ministry, the committee decided to phase in the housing transaction tax cut as promised by President-elect Lee Myung-bak, while at the same time setting up countermeasures to make up for the loss in tax revenue.

“The transition committee and home affairs ministry agreed that a decrease in the acquisition and registration tax would boost housing sales and, in turn, help stabilize prices,” said spokesman Lee. “The two bodies agreed to discuss at a second session on how to deal with the expected decline in tax revenue (estimated 1.25 trillion won).”

Meanwhile, the presidential transition committee concluded that the foreign ministry has suffered under the foreign policies of the Roh Moo-hyun administration and has decided to reshuffle government agencies in charge of foreign policies.

The committee plans to raise a $40 billion international cooperation fund to fund the President-elect Lee’s North Korean policy, “Denuclearization and Opening 3000.’ Under Lee’s plan, South Korea will play a critical role in attracting international support to help North Korea’s per capita GDP reach $3000 within ten years, only if North Korea dismantles all of its nuclear weapons programs and opens up its market.

“In its briefing, the foreign ministry said its policies had problems over the past five years,” according to committee spokesman Lee. “The transition committee concluded that the foreign ministry should have a larger role over the nation’s foreign policy, but that its functions had been diffused across several governmental agencies, including Cheong Wa Dae and the unification ministry.”

During the briefing session, the foreign ministry admitted that the US-Korea alliance had virtually dissolved, saying, “The US and Korea took opposing positions towards the threats posed by North Korea, thus restructuring the alliance.”

The ministry added that the “two nations did not have enough prior consultation before the Korean summit talks.” The ministry is anticipated to overhaul current policies related to the US-Korea alliance.

The ministry also added that regarding Korea-Japan relations, “political cooperation had suffered setbacks due to conflicts over history and the Dokdo islets since 2005.”

Separately, the agriculture and forestry ministry is set to take on authority affecting Korea’s food-related policies. The current ministry will be tentatively reorganized as the Ministry of Agriculture, Rural Community and Food and be given authority over all issues involving the food sector, including marine products.

The committee has yet to decide whether or not to give food safety related responsibilities, which currently resides with the Korea Food & Drug Administration, to the new ministry.

ddr@donga.com