Roadmap for Realizing Market Value of Officially Announced Prices, How Foreign Countries Do It

[Asia Economy Reporter Yoo In-ho] Controversy has arisen over the foreign public property prices cited as the basis for the government's roadmap to realize actual public property prices.

According to the industry on the 8th, the Ministry of Land, Infrastructure and Transport and the Ministry of the Interior and Safety recently established and announced on the 3rd a "Plan to Realize Actual Public Property Prices" under the "Real Estate Price Public Announcement Act" to ensure that public property prices reflect an appropriate level of market prices. Along with this, they also announced a "Property Tax Burden Relief Plan" to ease the tax burden resulting from the realization of public property prices and to stabilize housing for low-income households.

Accordingly, public property prices will be gradually realized up to about 90% of market prices. As of 2020, the realization rates of public property prices were 65.5% for land (based on standard land), 53.6% for single-family houses (based on standard houses), and 69.0% for multi-family housing, but once realization is completed, they will be at the same level of 90% by type.

In this regard, according to the "Research Task Directive for Establishing a Roadmap to Realize Actual Public Property Prices" from the Ministry of Land, Infrastructure and Transport (MOLIT), obtained by Rep. Yoo Kyung-joon of the People Power Party, a member of the National Assembly's Planning and Finance Committee and former head of Statistics Korea, MOLIT conducted simulations on changes in the number of taxpayers and payment amounts for property tax and comprehensive real estate tax (Comprehensive Real Estate Holding Tax), additional health insurance premiums for regional subscribers, and changes in basic pension recipients following the implementation of the realization of public property prices.

The document stated that public property prices affect more than 60 types of taxes, quasi-taxes, and administrative measures, including holding tax, health insurance premium imposition, selection of recipients for basic livelihood security benefits, and appraisal.

However, these facts were omitted not only from the public hearing held by MOLIT on the 27th of last month but also from the government's announcement. Rep. Yoo pointed out, "This shows that the Moon Jae-in administration was aware that the realization of public property prices could effectively lead to a large-scale tax increase on the entire population."

Rep. Yoo's side argued that the cases of Canada, Australia, and others cited as grounds for promoting the realization of public property prices were incorrect. They said, "As already revealed, Taiwan was deliberately presented as a wrong example," adding, "In fact, Taiwan, which the government cited as a model case for realizing public property prices, has a realization rate of only 20%."

Rep. Yoo also rebutted, based on overseas case studies submitted by the National Assembly Library, that in Germany, the standard market price (public property price) does not currently reflect real estate values but still applies values set in 1964 (former West Germany) and 1935 (former East Germany). Originally, revaluation of values was supposed to be conducted every six years after 1964 and 1935, but it has not been implemented due to high costs.

Regarding the UK, Rep. Yoo explained that although the Council Tax is levied on residential real estate, the tax base is assessed based on values as of April 1, 1991, due to residents' tax resistance.

According to the real estate tax operation plan for New York City submitted to Rep. Yoo's side by the National Assembly Legislative Research Office, the assessed value of real estate cannot be increased by more than 6% per year or more than 20% over five years.

In the case of the comprehensive real estate tax, compared to France, which implements it alongside Korea, Korea's level is excessively high.

According to data reported by the Legislative Research Office to Rep. Yoo's side, France's comprehensive real estate tax rate is 0.5% for the 800,000 and 1,300,000 euro brackets, whereas Korea imposes tax rates ranging from 0.6% to 0.8% for similar brackets of 900 million and 1.5 billion won.

Rep. Yoo's side analyzed that in France, debts included in real estate are excluded from the tax base, so the effective tax rate is only about half that of Korea.