The government has strongly signaled its determination to stimulate the depressed housing market by deciding to retroactively apply a proposed cut in home acquisition taxes.

In August, the government announced a plan to permanently lower taxes on home purchases starting next year. On Monday, however, it agreed with the ruling Saenuri Party to have the tax cut take effect retroactively from Aug. 28.

The policy change, which would cost the government 780 billion won in additional revenue losses, shows how far it is willing to go to stimulate housing transactions and thereby boost the economy.

Under the scheme, the acquisition tax rate on houses, worth less than 600 million won will be halved from the current 2 percent to 1 percent, while the rate on homes valued at more than 900 million won will be cut from the present 4 percent to 3 percent. The tax levied on homes in between will remain unchanged at 2 percent.

The government’s plan is subject to approval from the National Assembly, which means endorsement from the main opposition Democratic Party is essential.

The DP has accepted the proposal on condition that the central government compensate local governments for any revenue shortfall stemming from the proposed tax cut.

Local governments rely on home acquisition taxes for a quarter of their tax income. But they are unlikely to suffer any revenue drop, as the central government plans to set aside a larger share of its consumption tax income for them.

The proposed tax cut, if implemented as planned, is expected to increase housing transactions to some degree, as they have the effect of reducing the cost of purchasing homes.

In recent years, a growing number of families have chosen to rent a home, even though they can afford to buy one, as home prices have continued to fall. The tax cut is primarily intended to provide an incentive for these families to buy a home.

If housing trade picks up, it will benefit local governments by increasing their tax revenue. More importantly, it will help stabilize home prices and curb demand for jeonse-type rental homes, which are in short supply.

Yet the proposed tax cut alone is nowhere near enough to jump-start the housing market. Other proposals contained in the property market packages announced in April and August need to be implemented as well.

Yet these measures remain pending at the National Assembly. Lawmakers of the ruling and opposition parties need to end the prolonged legislative paralysis and get back to work.