Considering the Introduction of 'Punitive Taxation' on Gifts... Difficult to Guarantee Policy Effectiveness

Government "Reviewing" Gift Tax Surcharge

[Asia Economy Reporter Moon Chaeseok] As the number of multi-homeowners opting for real estate gifting to avoid tax burdens increases, the government has begun considering a surcharge on gift tax. This move comes in response to calls from the political sphere to introduce punitive taxation on gifting to encourage multi-homeowners to put their properties on the market. Experts, however, remain skeptical about the policy's effectiveness, suggesting that the legislative process may face difficulties.

According to the Ministry of Economy and Finance on the 21st, the government is internally reviewing the "Urgent Proposal for Additional Measures to Stabilize the Real Estate Market," submitted by Yoon Hoo-duk, the chairman of the National Assembly's Planning and Finance Committee and a member of the Democratic Party. A government official stated, "We are reviewing the opinions conveyed from the political sphere," adding, "It is currently difficult to comment on specific directions."

The proposal for a gift tax surcharge was introduced to counter the market trend of "preferring gifting over selling or holding." After the government raised capital gains tax burdens through the '7.10 Measures' last year, the market perception shifted toward gifting as a better option. The intention is to channel properties into the market through stronger policies rather than having owners choose gifting over listing their properties.

Yoon's office, which requested the review, said, "We judged that measures are necessary to prevent the loopholes in real estate taxation from being exploited for wealth inheritance through gifting," and added, "We understand that the government is also considering mid- to long-term measures."

The government has decided to raise the gift acquisition tax rate imposed on recipients from 3.5% to 12%, but the number of gifting cases increased from 11,430 in October last year to 15,393 in November.

Experts express doubts about the effectiveness of strengthening gift tax enforcement. Lee Eun-hyung, a senior researcher at the Korea Construction Policy Institute, said, "Even if the gift tax rate is raised to 5-10% higher than the capital gains tax rate, it is uncertain whether it will deter multi-homeowners from gifting," expressing a negative view.

Lee explained, "From the perspective of multi-homeowners, holding onto properties is an option besides buying and selling. If the gift tax rate is increased amid rising housing prices, multi-homeowners may simply choose not to sell their homes at all."

Ultimately, even if both capital gains tax surcharges and gift taxes are heavily imposed, the policy effect of expanding supply may be limited, and the government could face strong criticism that "only regulations have increased."