Professor Lee Jung-gu: "Rental Business Owners Have Received Huge Tax Benefits... They Cannot Be Victims"

"Some Rental Business Operators Pretending to Be Victims"
"Just Imposing the Same Taxes as Others"
"Regrettable That Rental Business Operators Were Abolished Late"

Professor Lee Joon-gu, Department of Economics, Seoul National University. (Photo by Professor Lee Joon-gu's homepage)

[Asia Economy Reporter Moon Jiwon] Professor Emeritus Lee Jung-gu of the Department of Economics at Seoul National University criticized some landlords who complain about being hit with a 'tax bomb' due to the July 10 real estate measures, saying they are "playing the victim" and calling it "truly outrageous."

In a post on his personal homepage on the 4th, Professor Lee stated, "I have consistently maintained the stance that landlords should not be collectively criticized," adding, "however, it is truly outrageous that some landlords are playing the victim."

Earlier, the government decided through the July 10 measures last month not to accept new registrations for 4-year short-term leases and to abolish the 8-year long-term lease system for apartments only. Initially, the government encouraged registered rental housing, claiming it helped stabilize housing for ordinary citizens, but after landlords took advantage of tax benefits to purchase multiple homes, causing house prices to rise, controversy ensued, leading to the eventual abolition of the system.

In response, landlords protested, saying, "The government unilaterally canceled the promised benefits," and "We registered as landlords trusting the government, but now we are hit with a tax bomb."

However, Professor Lee argued, "It is incorrect and detached from reality to say they have become targets of punitive taxation." He questioned, "The meaning of the July 10 measures is simply that unfair tax benefits will no longer be given to them. It does not mean imposing heavier taxes than others, but rather taxing them equally. How is that a harm?"

He continued, "Is it normal for a landlord owning five houses to pay 1 million won in comprehensive real estate tax, or is it normal to pay 70 million won?" He added, "Everyone knows that it is abnormal for someone owning real estate worth billions of won to pay only 1 million won in taxes."

Professor Lee also emphasized that none of the landlords have actually suffered damage. He said, "If all the tax benefits landlords have enjoyed so far were reclaimed, then they might be considered victims," but "the tax benefits they have enjoyed so far have not been touched at all and remain fully in their hands."

He further explained, "Most importantly, if landlords move in the direction the government encourages, there is absolutely no need to bear a heavy tax burden," adding, "Even landlords who currently have to pay 70 million won in comprehensive real estate tax can reduce it back to 1 million won by keeping only the house they live in and disposing of the rest."

Professor Lee argued that landlords cannot be victims because they can realize huge capital gains by selling the houses they have held while receiving tax benefits, paying only some capital gains tax.

He emphasized, "(If landlords dispose of their houses) they will be able to realize huge profits thanks to the skyrocketing house prices, and this is achievable by paying only a very small amount of capital gains tax," adding, "even if the system is abolished today, they can never be victims."

While landlords protest that the government violated 'policy consistency,' Professor Lee pointed out that it is rather regrettable that the abolition was delayed. He said, "If someone values policy consistency, shouldn't the same standard be applied to income-led growth policies or the 52-hour workweek?" He added, "I believe that if the system had been abolished immediately upon taking office, today's tragedy could have been prevented."