"Rather, Only the Local Finance System Is Complex"
[Asia Economy Reporter Kim Min-young] The National Assembly Research Service has expressed the opinion that the integration of the comprehensive real estate tax and property tax, which the new government is promoting to resolve the controversy over "double taxation," does not have significant practical benefits. Simply reverting the national tax to a local tax and reintegrating it with the property tax would rather complicate the local fiscal system. However, on the other hand, there is an argument that the integration should be pursued because it aims to improve the unreasonable punitive taxation.
In the report titled "Implications of the Discussion on the Integration of Comprehensive Real Estate Tax and Property Tax" released on the 14th, the National Assembly Research Service stated, "In the reform of the comprehensive real estate tax, simply reverting the national tax to a local tax and reintegrating it with the property tax while maintaining the existing allocation method of the grant tax does not have significant practical benefits," and added, "It may rather complicate the local fiscal system, so a cautious approach is necessary."
The real estate holding tax system, which was based on the comprehensive land tax and property tax in the past, abolished the comprehensive land tax in 2005 and introduced the national comprehensive real estate tax. With the establishment of the comprehensive real estate tax, holding taxes became dualized for those holding excessive residential land: first, property tax is imposed, and second, the comprehensive real estate tax is levied as a national tax by aggregating owned real estate nationwide by property type and by individual.
After the inauguration of the Moon Jae-in administration, as housing prices surged, the government sought to increase the tax burden on multi-homeowners to block speculative housing purchases by strengthening the comprehensive real estate tax rates and other tax reforms. As a result, the comprehensive real estate tax burden increased proportionally with the soaring housing prices, leading to taxpayer complaints about the so-called "comprehensive real estate tax bomb." The Yoon Suk-yeol administration's declaration to integrate property tax and comprehensive real estate tax as a national taxation measure also reflects recognition of these side effects of the comprehensive real estate tax.
Lee Se-jin, head of the fiscal economy team at the Economic and Industrial Research Office of the National Assembly Research Service, who authored the report, pointed out that the integration would only widen the fiscal capacity gap among local governments. He also forecasted that costs required for securing organizational personnel and establishing and operating IT systems would increase by 12.6 billion KRW over the next five years due to the shift to local taxation.
Lee suggested, "We need to seek a reasonable adjustment and compromise of the recently strengthened comprehensive real estate tax rates and tax bases while maintaining the current real estate holding tax system," and added, "Designing an appropriate holding tax structure with a proper burden should be prioritized."
On the other hand, there are criticisms that such arguments judge practical benefits mainly from the perspective of local governments that collect and operate taxes rather than from the taxpayers' standpoint. This is because the very purpose of integrating the comprehensive real estate tax and property tax is to alleviate unreasonable taxation methods and improve the progressive and punitive structure of the comprehensive real estate tax, which is excessively applied.
Professor Kim Woo-chul of the Department of Taxation at the University of Seoul said, "The property tax integration plan arises from the fact that the comprehensive real estate tax, which is operated to mitigate asset inequality, has become an unreasonable tax system distorted by punitive taxation, increasing the burden on taxpayers," and added, "It is desirable to integrate the tax burden considering efficiency and equity and move toward a single tax rate."
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