[Why & Next]① 'Modern Window Tax'... Law to Abolish Jongbu Tax Emerges

Rep. Jo Kyung-tae of People Power Party Pushes for Abolition of Comprehensive Real Estate Tax
Outcome of 1,900-Person Constitutional Lawsuit on Comprehensive Real Estate Tax Uncertain

[Asia Economy Reporter Lee Hyun-joo] In 1696, the British government imposed a tax (window tax) based on the number of windows in a house. The more windows a house had, the larger and wealthier it was likely to be, so it was judged that the taxpayer had sufficient ability to bear the tax burden. At the time, the window tax was considered a fair tax. Initially, it was a temporary law but became regularized, and the fixed tax rate for up to 10 windows gradually increased during its early implementation.

The British began blocking windows to avoid the tax. Tricks emerged such as boarding up windows or filling them with bricks. As a result, the urban poor suffered the most. The communal housing where they lived had many windows. Landlords blocked windows to reduce taxes, and tenants began to fall ill. Measles and cholera spread in narrow, damp, windowless houses. In 1850, the British Parliament finally proposed the abolition of the window tax. During the debate, there were many voices criticizing the window tax as a "sunlight thief."

Will the "Comprehensive Real Estate Holding Tax (Jongbu Tax)" follow the path of the modern-day window tax? Although tax resistance has somewhat subsided after the Yoon Seok-yeol administration significantly eased the payment criteria for the Jongbu Tax, discussions about abolishing the Jongbu Tax are still "ongoing."

[Image source=Yonhap News]

According to political circles on the 24th, Rep. Cho Kyung-tae of the People Power Party is preparing a bill to abolish the Jongbu Tax. Rep. Cho plans to submit the bill to the National Assembly after discussions with the National Assembly Legislative Office by the end of this month and collecting signatures from fellow lawmakers.

Earlier, on the 10th of this month, Rep. Cho held a forum at the National Assembly Members' Office Building titled "Why Should the Jongbu Tax Be Abolished?" At this event, Lee Jae-man, head of the Real Estate Malpractice Law Abolition Coalition (and former head of the Daejeon Regional National Tax Service), who is leading the constitutional lawsuit against the Jongbu Tax, advocated for its abolition.

The Yoon Seok-yeol administration, through tax law revisions at the end of last year, excluded two-homeowners in designated adjustment areas from the Jongbu Tax's heavy taxation and raised the basic deduction for one-household-one-homeowners from the previous official price of 1.1 billion KRW to 1.2 billion KRW. However, Lee argues that the abolition of the Jongbu Tax should be discussed based on the current government's regulatory easing policy.

Lee is currently conducting a constitutional lawsuit against the Jongbu Tax with about 1,900 participants. In a recent interview with Asia Economy, he asserted, "A country that does not protect private property rights does not uphold liberal democracy." He said, "First, the Jongbu Tax infringes on the essential content of property rights (Article 37, Clause 2 of the Constitution), and second, it violates the right to equality by imposing discriminatory taxation on multi-homeowners and corporations. Since it violates the principle of equality and fundamentally infringes on property rights, it violates the principle of taxation by law and is therefore unconstitutional."

The Jongbu Tax is currently under review by the Constitutional Court based on 5,588 requests for constitutional review. It is expected that a conclusion will be reached around May this year. However, whether the Jongbu Tax will be ruled unconstitutional remains uncertain.

On the 28th, members of the Real Estate Evil Law Abolition Coalition held a picket protest urging the abolition of the comprehensive real estate holding tax in front of the National Assembly in Yeouido, Seoul. Photo by Kang Jin-hyung aymsdream@

Last year, taxpayers owning apartments in Gangnam-gu and Seocho-gu, Seoul, filed administrative lawsuits against the imposition of the Jongbu Tax but lost. The Administrative Division 2 of the Seoul Administrative Court (Chief Judge Shin Myung-hee) ruled in July last year that plaintiffs A and B lost their lawsuits against the heads of Samsung Tax Office and Banpo Tax Office, who imposed the Jongbu Tax and other charges. The court also dismissed their request for a constitutional review.

Last Year’s Administrative Lawsuit Against Jongbu Tax Rejected... Bill to Abolish Jongbu Tax Underway

The plaintiffs argued that calculating the Jongbu Tax based on official prices and fair market value ratios violates the principle of taxation by law, which requires taxation conditions to be stipulated by laws enacted by the National Assembly. They also claimed that imposing the Jongbu Tax on the same subjects as property tax and capital gains tax constitutes double taxation and that it violates the principle of equality by discriminating without reason between those holding other assets and those holding real estate.

However, the court ruled that the Jongbu Tax Act cannot be considered unconstitutional. It also stated that property tax is appropriately deducted from the Jongbu Tax, and since capital gains tax targets capital gains rather than real estate value, it cannot be regarded as double taxation.

Past constitutional lawsuits regarding the Jongbu Tax had mixed outcomes. The Constitutional Court ruled in 2008 that the Jongbu Tax was not double taxation, but the combined imposition of the Jongbu Tax by household was declared unconstitutional.

In response, Rep. Cho is drafting a bill to abolish the Jongbu Tax entirely. He pointed out, "The Jongbu Tax was introduced to tax high-value asset owners and catch speculators, but house prices soared instead," adding, "As a result, it turned into a tax bomb for the middle class."

He continued, "After persistent negotiations between the ruling and opposition parties last year, a revised bill easing the Jongbu Tax deduction criteria for one-homeowners passed the plenary session of the National Assembly, but controversy over the Jongbu Tax itself remains," and said, "We will listen to the voices of citizens suffering from the Jongbu Tax and reflect reasonable alternatives, including abolition of the Jongbu Tax, in policy."

Previously, during the 18th National Assembly, a bill to abolish the Jongbu Tax was also proposed. At that time, Rep. Yoo Seung-woo of the Saenuri Party (predecessor of the People Power Party) proposed the "Comprehensive Real Estate Tax Abolition Act" in 2013 to convert the Jongbu Tax into a local tax by abolishing the Jongbu Tax Act, but it was automatically discarded with the end of the 18th National Assembly. Rep. Yoo explained in the bill proposal that "due to changes in taxation conditions, the Jongbu Tax's function to curb real estate speculation, income redistribution, and regional resource allocation has weakened, turning it into a general property tax."