Variables such as Moon Jae-in Government's Rapid House Price Rise and Taxation Changes... New Judgment on the Legitimacy of Comprehensive Real Estate Tax Expected
[Asia Economy Reporter Baek Kyunghwan] The comprehensive real estate holding tax (종합부동산세, 종부세) is once again facing a ruling from the Constitutional Court. The cause stems from the sharp increase in 종부세 due to the Moon Jae-in administration’s measures to respond to the rapid rise in housing prices by strengthening heavy taxation on multi-homeowners and pushing for realistic tax base adjustments. However, considering that the Constitutional Court has mostly ruled the 종부세 constitutional in the past, it is highly likely that this time as well, the legislative purpose and intent of "stabilizing real estate prices" will be prioritized and respected.
According to the legal community on the 21st, the law firm Logos recently began recruiting plaintiffs for an unconstitutionality lawsuit, claiming that "the current 종부세 violates the principle of tax equality due to excessive tax rates applied to multi-homeowners and corporations." Among the representatives are former Acting Chief Justice Lee Jung-mi, who sentenced former President Park Geun-hye’s impeachment, and former Constitutional Court Justice Min Hyung-gi, who was the presiding judge during the 2008 ruling on the unconstitutionality and constitutional inconsistency of the Roh Moo-hyun administration’s 종부세.
The controversy over the constitutionality of 종부세 has been repeated dozens of times since the enactment of the 종부세 Act in 2005. There have been over 40 rulings related to 종부세 by the Constitutional Court, most of which ended with a decision of constitutionality.
However, the situation changed under the current government as heavy taxation on multi-homeowners was strengthened and the tax base was adjusted realistically. Since 2019, the fair market value ratio used to determine the tax base has been raised by 5 percentage points annually from 80%, and heavy taxation was imposed on owners of two homes in designated adjustment areas and those owning three or more homes.
Logos’s move to file an unconstitutionality lawsuit against 종부세 is in the same context. Unlike in the past, as 종부세 has changed several times and the tax amount has increased, they argue that the constitutionality regarding infringement of fundamental rights must be re-examined. Specifically, they claim unconstitutionality due to ▲violation of the principle of tax equality caused by excessive tax rates on multi-homeowners and corporations ▲infringement of property rights due to triple taxation burden from property tax, capital gains tax, and excessive 종부세 ▲lack of provisions for ‘temporary two-homeowners’ and indiscriminate taxation as two-homeowners, violating tax equality and property rights ▲and substantial violation of the principle of taxation by law regarding tax items and rates.
However, considering past precedents, the legal community believes that 종부세 is likely to survive this time as well. The key point is that the Constitutional Court has supported the legislative purpose and intent of 종부세, which is "stabilizing real estate prices." In November 2008, the Constitutional Court ruled some aspects such as household-based combined taxation unconstitutional but upheld the constitutionality of 종부세 itself.
At that time, the Court ruled, "The legislative purpose is to enhance fairness in tax burden on real estate holdings and stabilize real estate prices, contributing to balanced development of local finances and sound development of the national economy, and the appropriateness of the method can be accepted." In particular, it stated, "Considering the proportion of 종부세 taxpayers among all property tax payers, it is difficult to say that the tax base or tax burden is excessive in light of the legislative purpose."
Regarding the controversy over double taxation, it is likely to be approached with the same logic as before. The Court previously ruled, "Even if the same real estate is subject to both property tax and 종부세, the parts taxed by local governments as property tax and by the state as 종부세 are separated, so paying property tax does not mean paying 종부세 again on the same part."
A lawyer from law firm A said, "It is unlikely that a different decision will be made compared to 10 years ago in terms of taxation for housing price stabilization, but the controversy over the positive functions of taxation caused by the rapid increase in tax rates is worth reconsidering," adding, "The part related to infringement of property rights may also receive a new interpretation."
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