Yejeongcheo Publishes 2022 Total Revenue Budget Analysis Report
Next Year's Capital Gains Tax Revenue Estimated at 20.5 Trillion KRW... 2 Trillion KRW Difference from Government Forecast
[Sejong=Asia Economy Reporter Kim Hyunjung] The National Assembly Budget Office (Yejeongcheo) forecasted that while real estate prices will continue to rise next year, transactions will sharply decline. Considering the government's strengthened capital gains tax rates, continuous increases in official land prices, and rising interest rates, Yejeongcheo judged that capital gains tax revenue will decrease more significantly than the government's prediction. It also anticipated that next year's comprehensive real estate tax revenue will slightly increase compared to the government's forecast.
On the 25th, Yejeongcheo published the '2022 Total Revenue Budget Analysis' report and projected total revenue for next year at 552.1 trillion KRW, which is 3.2 trillion KRW (0.6%) higher than the government's budget proposal of 548.8 trillion KRW.
Although the overall revenue is not significantly different from the government's estimate, there are differences by tax category, especially centered on the real estate and asset markets. Capital gains tax is a representative example.
Yejeongcheo expects capital gains tax revenue next year to record 20.5 trillion KRW, a sharp decrease of 6.5 trillion KRW (-24.1%) compared to the previous year. This is about 2 trillion KRW less than the government's capital gains tax revenue forecast of 22.4 trillion KRW for the same period. Yejeongcheo explained, "Since January last year, the application requirements for the long-term holding special deduction rate for single-home households have been strengthened, and from June, the capital gains tax rates for multi-homeowners in regulated areas and for homes held less than two years have been increased." It added, "If interest rates rise in the future, it is expected that price growth will slow and real estate transaction volumes will significantly decrease due to weakened investment sentiment."
Regarding the comprehensive real estate tax (종부세), Yejeongcheo expects real estate prices to continue rising next year and forecasts comprehensive real estate tax revenue to increase by 700 billion KRW (12.3%) to 6.7 trillion KRW compared to the previous year. Yejeongcheo stated, "This is mainly due to the rise in official land prices, which serve as the basis for the tax base, driven by the increase in the realization rate of government official land prices (the ratio of official land price to market price)." It added, "Institutional factors such as the increase in the fair market value ratio (100% from 2022 onward) will also partially contribute to the tax revenue increase." The government also projected this year's comprehensive real estate tax revenue at 6.5 trillion KRW, which is not significantly different from Yejeongcheo's forecast.
Both the government and Yejeongcheo expect securities transaction tax to decrease to the 7 trillion KRW range next year compared to this year. Yejeongcheo explained, "The trading value of the KOSPI and KOSDAQ markets from January to September this year showed increases of 50.8% and 185.3% respectively compared to last year, so a decline from this high level is expected." It forecasted securities transaction tax revenue at 7.7 trillion KRW, 500 billion KRW (-6.4%) less than this year. The government also projected securities transaction tax revenue at 7.5 trillion KRW for next year.
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