[Asia Economy Sejong=Reporter Kwon Haeyoung] The number of single-household single-homeowners paying comprehensive real estate tax (종합부동산세) this year is expected to reach about 220,000, more than six times higher than five years ago, increasing calls for tax reform. This is because the comprehensive real estate tax, which was originally a punitive tax, has transformed into a tax that ordinary citizens, not just high-asset individuals, have to pay. Accordingly, the government is pushing forward with a tax reform plan that includes surgery on the comprehensive real estate tax, but opposition from the opposition party is strong, making its realization a steep challenge.
According to the Ministry of Economy and Finance on the 19th, the number of comprehensive real estate tax payers this year is 1.2 million, of which single-household single-homeowners are estimated to be 220,000. This is more than six times the 36,000 in 2017.
The total tax amount for single-household single-homeowners also surged more than 16 times from 15.1 billion won in 2017 to 240 billion won in 2022. This means that even genuine buyers without speculative intent bear a significant comprehensive real estate tax burden.
The total number of comprehensive real estate tax payers reached 1.2 million, exceeding 1 million for the first time this year, and the total tax amount is expected to be in the 4 trillion won range. Compared to five years ago, the number of taxpayers has increased fourfold, and the total tax amount has increased about tenfold.
Considering that the Gross National Income (GNI) rose by 12.8% and housing prices increased by 36.8% during the same period, the tax burden has increased significantly in a short period.
Accordingly, international organizations such as the Organisation for Economic Co-operation and Development (OECD) are also recommending reform of the comprehensive real estate tax. The OECD stated in the '2022 Korea Economic Report' that rapid increases in the comprehensive real estate tax have caused problems such as reduced taxpayer acceptance and the passing of tax burdens onto tenants, and suggested reforming it to a sustainable tax burden level.
The government announced a tax reform plan in July that includes surgery on the comprehensive real estate tax. The main points are ▲ lowering the maximum tax rate (from 6% to 2.7%) and unifying the tax rate ▲ increasing the basic and special deduction amounts (from 600 million won to 900 million won, and from 1.1 billion won to 1.2 billion won, respectively) ▲ unifying the tax burden cap (from 150-300% to 150%). Currently, the comprehensive real estate tax is differentially taxed depending on whether the taxpayer owns multiple homes or is a corporation, but going forward, the tax will be imposed based on the assessed value. Through this, the government plans to appropriately ease the tax burden while normalizing the tax system that has been distorted into a 'punitive measure' without stabilizing the housing market.
However, the main opposition party, the Democratic Party of Korea, criticizes the comprehensive real estate tax reform as a 'tax cut for the rich,' making it virtually impossible for the government’s original plan to pass. Contrary to their presidential and local election pledges to push for comprehensive real estate tax reform, the Democratic Party blocked the government’s temporary increase of the comprehensive real estate tax deduction amount for single-household single-homeowners this year (from 1.1 billion won to 1.4 billion won). Despite the need for reform, significant difficulties are expected during the National Assembly discussions going forward.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
