Property tax bomb
Punitive real estate tax needs overhaul
The Moon Jae-in administration is facing growing tax resistance from owners of multiple and high-priced homes who will have to pay a much higher property tax from next month. The number of people subject to the so-called comprehensive real estate tax amount to 947,000 this year, up 42 percent from 667,000 last year, the Ministry of Economy and Finance said Monday. This accounts for 1.8 percent of the nation’s total population. They must pay a combined 5.7 trillion won ($4.8 billion) in taxes this year, up more than 200 percent from last year.
The comprehensive real estate tax, introduced in 2005 to curb property speculation, is levied on owners of multiple homes with a combined state-assessed home value surpassing 600 million won. Owners of one home must also pay when their home is valued at over 1.1 billion won, a taxation base which was previously set at 900 million won.
It appears inevitable to see the sudden upsurge in the real estate tax amid a sharp rise in home prices coupled with higher tax rates aimed at fighting property speculation. However, complaints are growing over the “tax bomb.” The Moon administration cannot deflect criticism for attempting to pass the buck on to the people because it has failed to stabilize housing prices with its misguided anti-speculation polices. The government should not say that there is no problem with the punitive tax as less than 2 percent of Koreans are affected by the soaring burden ― not the majority of taxpayers.
What is worrisome is that tenants are likely to bear the brunt of the heavy taxation as landlords are certain to raise rents to mitigate their higher tax burden. An increasing number of owners of multiple homes have bequeathed part of their property to their children or other family members to avoid taxes. By September this year, the number reached 63,054, the second largest since 2006 when relevant surveys began.
The mounting tax burden has also ignited a heated debate among major presidential candidates. Yoon Seok-youl of the main opposition People Power Party (PPP) has pledged an overhaul of the current system. “Once I am elected president, I will either integrate the comprehensive real estate tax into the property tax or exempt the owners of one home from the taxation.” Yoon is seemingly trying to highlight President Moon’s policy failures regarding housing speculation in order to woo disgruntled voters in the run-up to the March 9 presidential poll.
In contrast, Lee Jae-myung of the ruling Democratic Party of Korea (DPK) has expressed opposition to the idea of abolishing the punitive tax. “Instead of doing away with the comprehensive tax and thus reducing the tax burden on the rich, we need to make sure taxes collected from real estate can be provided to more people.” Lee is apparently attempting to defend Moon’s real estate policies and make a pitch for his populist idea of redistributing wealth to the poor.
We call for an overall review of the punitive tax scheme ― but this does not necessarily mean abolishing it. Tax systems should never be interfered with for the sake of politics or ideology. What is most urgent is to modify the current system to correct its problems and ease the tax burden on owners of only one home who have nothing remotely to do with property speculation.