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SEJONG, July 16 (Yonhap) -- The government will finalize its stance on whether to permanently cut or exempt acquisition tax rates for home purchases by September amid worries that the prolonged property market slump could hamper the country's overall economic recovery, the finance minister said Tuesday.
"The acquisition tax issue should be dealt with along with other issues such as how to distribute financial sources between central and local governments," Finance Minister Hyun Oh-seok told reporters.
"This means that we have to take into consideration the government budget for next year as well in making a final decision on the tax issue," he added.
Given that the government usually completes its budget proposal for the following year by the end of September, his remarks mean that the final decision on the tax issue will be made in the middle of the month.
The government has lowered acquisition tax rates several times before as a major tool to stimulate stagnant home transactions but they were not permanent, only temporary reductions. Critics say that the impact of such a temporary benefit peters out as soon as the tax-cut period expires.
Experts are demanding the government make the tax benefit permanent as worries are mounting that the property market might be falling off the so-called transaction cliff following the expiration of the latest tax cut for home purchases in late June.
Policymakers are sharply divided over the issue.
The land and transportation ministry supports the idea, saying that it would help stimulate the country's property market by lowering the transaction costs. The public administration ministry remains opposed, worrying that it could erode tax revenue for local governments since the acquisition tax is one of their major income sources.
The finance ministry is in charge of budget affairs, with its minister serving as the deputy prime minister tasked with coordinating polices among government agencies.
Some argue that the central government has to consider diverse ways to make up for shortfalls that local governments have to face when the acquisition tax rates are lowered or exempted.
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