Seo Eun-hee, Seocho District Mayor, Proposes 50% Property Tax Reduction for Single-Homeowners Under 900 Million Won; Seoul City Council Members Seo Yoon-gi and Kim Kyung-young of the Democratic Party Oppose, Citing Lack of Consideration for Revenue-Short Municipalities
[Asia Economy Reporter Park Jong-il] The property tax reduction war initiated by Seocho District Office has begun.
Jo Eun-hee, the head of Seocho District Office, announced that the “Partial Amendment to the Seoul Special City Seocho District Tax Ordinance” aimed at reducing the property tax burden for “owners of one household and one house” has passed the district council, and decided to actively promote the property tax reduction policy.
Mayor Jo announced that for owners of a single house with a standard market value of 900 million KRW or less, the property tax rate for the 2020 tax year will be reduced by 50%.
In response, Seoul City Council members Seo Yoon-gi and Kim Kyung-young, both from the Democratic Party, have voiced opposition.
On the 28th of last month, Councilor Seo stated, “In 2020, the property tax on housing in Seocho District was 217.2 billion KRW, of which property tax on houses valued at 900 million KRW or less accounted for 11.7%, or 25.4 billion KRW (82,652 cases). However, in Nowon District, 99.8% of the total housing property tax of 32.3 billion KRW, or 32.2 billion KRW (207,664 cases), was on houses valued at 900 million KRW or less,” adding, “Seocho District, a wealthy district, will not be significantly affected by the reduction of property tax on houses valued at 900 million KRW or less, but other districts will be.”
Ultimately, the claim is that Mayor Jo’s property tax reduction plan favors only wealthy districts like Seocho.
Alongside this, Kim Kyung-young, Seoul City Council member for Seocho District’s 2nd electoral district, urged Mayor Jo to temporarily halt the “50% property tax reduction policy for households owning one house valued at 900 million KRW or less” which he is pushing unilaterally, and to use the increased tax revenue for policies benefiting ordinary citizens and self-employed workers.
◇ What is Seocho District’s declaration of the property tax reduction war?
Seocho District will refund up to 6.3 billion KRW in property tax to single-house owners of houses valued at 900 million KRW or less, which corresponds to 69,145 households or 50.3% of the total 137,442 housing units. The 50% reduction applies only to the district’s portion of the property tax rate, excluding the Seoul city portion. Since the jointly collected tax portion paid to Seoul city remains unchanged, there will be no reduction in the shares of other districts.
Single-house owners in Seocho District with houses valued at 900 million KRW or less will receive refunds ranging from less than 10,000 KRW to up to 450,000 KRW, averaging about 100,000 KRW.
Seocho District is the only one among Seoul’s 25 districts to pursue property tax reductions. This is in consideration of the economic downturn caused by the COVID-19 disaster and the increased property tax burden due to government adjustments in publicly announced property prices, which have intensified taxpayers’ financial pain more than in any other year.
In Seocho District, the publicly announced price of apartment complexes surged by 22.5% this year, causing the housing property tax payments to increase by 72% over the past three years. As a result, even middle-class ordinary citizens owning one house, who have no connection to real estate speculation, have been hit by a tax bomb, leading to over a thousand complaints and appeals to the district office daily.
Therefore, the district judged that punitive taxation on owners of one house who are not involved in real estate speculation is problematic, and has been steadily preparing based on Article 111, Paragraph 3 of the Local Tax Act, which allows the district head to reduce property tax by 50% for the relevant year in cases of disasters or similar situations.
Jo Eun-hee, head of Seocho District Office, said, “The benefit amount ranges from 10,000 KRW to 450,000 KRW, averaging about 100,000 KRW, which is too small, and I apologize. We have done the maximum possible within the legal framework,” adding, “I hope Seocho District’s initiative will serve as a catalyst for other districts to join.”
Mayor Jo is interpreted to have judged that it is right to reduce some of the tax burden in preparation for an increased comprehensive real estate tax burden due to the government’s failure in real estate policies.
◇ Seoul City Council member Seo Yoon-gi followed by Kim Kyung-young also join criticism of Mayor Jo
Councilor Kim Kyung-young said, “Although there may be no legal defects in unilaterally implementing a proposal that was rejected at a meeting of elected district heads, it is necessary to consider whether this aligns with the principles of democracy,” arguing that there are problems in the promotion process.
Moreover, there are concerns that this outcome will undermine tax fairness. Councilor Kim said, “The direction Seocho District wants to take is a regressive tax policy that grants greater tax reductions to the wealthy,” and added, “Seoul city should actively request reconsideration.”
In particular, Councilor Kim stated, “The government plans to announce a tax reduction policy for single-house owners in October, but Mayor Jo is damaging administrative unity and efficiency on his own,” and “The average reduction per household is about 100,000 KRW, with a total expected amount of 6.3 billion KRW, which is small compared to the increased tax revenue, making it difficult to see this as an effective policy. Whether winning or losing, it is doubtful whether this ‘winning card’ style policy is truly for the residents’ benefit.”
He also emphasized the need for cautious policy promotion, saying, “If Mayor Jo is sincere, the policy should be supplemented and improved after the government’s policy announcement in October.” He added, “If tax revenue has increased more than expected, priority should be given to expanding support projects for the local community and small business owners,” and said, “The first penguin should be for ordinary citizens, self-employed workers, and youth, not for tax cuts benefiting the wealthy.”
When Mayor Jo first proposed the 50% property tax reduction for single-house owners with houses valued at 900 million KRW or less, Seoul City Council members from the Democratic Party criticized it citing the loss of tax revenue for ‘poor districts.’
However, it is difficult to rule out political speculation that Mayor Jo’s move is a warning to the public against the government’s excessive real estate tax policies and a strategic step with the 2022 Seoul mayoral by-election in mind.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
