Government retreats on top 1% tax increase after 29 days, raising concerns over fair-tax reform

A South Korean plan to raise property taxes on the country’s wealthiest homeowners has been scaled back just 29 days after it was announced, prompting concern that the government has lost momentum for fair-tax reform.

The 2026 tax plan approved by the Cabinet keeps the basic 1.2 billion won deduction for a single home owned by a nonresident. The government had announced on Aug. 3 that it would reduce the allowance to 900 million won. It had also proposed different treatment for residents and nonresidents, with a 1.4 billion won deduction for resident homeowners and 900 million won for nonresidents. The Democratic Party had urged the government to remove that distinction.

The reversal came nine days after the party made its demand at a high-level consultation. Several government officials said the change appeared to have been decided urgently on the eve of the Cabinet meeting. The shift coincided with President Lee Jae-myung’s acceptance of the resignation of Kim Yong-beom, the senior presidential policy secretary. The changes were interpreted as an effort to ease public dissatisfaction over real-estate policy while accommodating the ruling party’s calls for lower tax burdens.

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If fair taxation was the policy goal, the government should have moved forward by persuading the public despite the difficulties, but it retreated without a word of explanation

The revised plan also gives each spouse in a jointly owned nonresident single-home household a 600 million won deduction, for a combined 1.2 billion won. The government had proposed deductions of 400 million won each. It will also retain the existing ceiling that prevents annual property-tax payments, including comprehensive real-estate tax, from exceeding 150% of the previous year’s amount. The original proposal would have raised that ceiling to 200%.

The Democratic Party said it had consistently sought measures to prevent excessive concern about tax burdens and would pursue further changes during parliamentary review. Kim Hyun-dong, a professor at Pai Chai University, criticized the government for retreating without explaining the decision. He said that if fair taxation was the policy goal, officials should persuade the public despite difficulties, and warned that the reversal could damage the government’s reform capacity.

Only about 3% of South Korea’s 15.976 million individual homeowners paid comprehensive real-estate tax last year. Single-home taxpayers accounted for about 1% of all homeowners. The government will keep existing rules allowing unlimited extensions of Individual Savings Account maturities and the carryover of unused annual contribution limits. A proposed law aimed at preventing stock-price suppression passed in its original form, with possible revisions left to parliamentary review.

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The party has consistently raised various proposals for improvements, including eliminating differences in the basic deduction for single-home owners based on residence, so that concerns over tax burdens do not spread excessively