Partial Amendment to the Local Tax Special Cases Act Finalized on the 15th
Governor Kim Jin-tae, "Systems and Policies Must Change with the Times"
[Asia Economy Reporter Ra Young-cheol] Gangwon Province is entering the process of abolishing the 'Villa Heavy Taxation Abolition Act,' which has been promoted ahead of the launch of the Special Self-Governing Province in June.
Gangwon Province is rapidly emerging as an alternative to Jeju Island, which is a representative domestic tourist destination but has inconvenient accessibility. The resulting population influx also has the effect of revitalizing Gangwon's economy and slowing regional extinction.
With the partial amendment to the 'Local Tax Special Cases Restriction Act,' mainly proposed by National Assembly member Kwon Seong-dong (People Power Party) to abolish the 'Villa Heavy Taxation Regulation,' scheduled for final approval on the 15th, Gangwon Province expects the 'Villa Heavy Taxation Abolition Act' to have a positive effect on regional economy and local government acquisition tax revenue by revitalizing housing transactions outside the metropolitan area.
According to the province on the 13th, the proportion of villa heavy taxation to the total tax amount in Gangwon Province last year was 0.06% (300 million KRW) of acquisition tax (642.2 billion KRW) and 0.11% (200 million KRW) of property tax (254.3 billion KRW), respectively.
In terms of population ranking by resident registration numbers, Gangwon ranks 12th among 17 cities and provinces, but when including tourists, the population ranking (as of 2019) is 5th. Under these circumstances, villa-related regulations have failed to properly absorb the actual demand for second homes such as country houses.
Therefore, the province judges that the effect of villa heavy taxation is not significant and holds the position that the abolition of the villa heavy taxation system is necessary, especially to overcome the crisis of regional extinction caused by population concentration in the metropolitan area.
They plan to emphasize that abolishing villa heavy taxation will increase the living population, revitalize the local economy, and create macro-level residential conditions through the activation of returning farming and rural migration.
Meanwhile, the 'Villa Heavy Taxation Regulation,' introduced in 1973 to suppress luxury and wasteful consumption, is criticized for not reflecting the current era of economic development and becoming an obstacle to the development of depopulated areas.
According to current law, buildings used for vacation, leisure, or play purposes without permanent residence are defined as 'villas' and are subject to an additional 8% heavy tax rate on top of the basic acquisition tax rate.
However, in 2021, the nationwide acquisition tax on villas amounted to 3 billion KRW, with taxation only carried out in parts of Gangwon, Jeju, and Gyeonggi, while other regions including the metropolitan area have not actively enforced taxation.
It is considered an ineffective and unfair regulation that fails to reflect the changing times, which require broad population policies introducing concepts of living population and staying population, as well as the continuous increase in returning farming and rural migration.
On the contrary, the heavy taxation system is operated on luxury houses and multi-homeowners, complementing and achieving the original purpose of introducing villa heavy taxation.
Accordingly, since the launch of the 8th local government, the province has recognized villa heavy taxation as an unfair regulation that acts as an obstacle to regional balanced development not only in Gangwon but also nationwide, and has requested its abolition to the Ministry of the Interior and Safety and the National Assembly.
Kim Jin-tae, Governor of Gangwon Province, said, "As times change, systems and policies must also change," adding, "Based on the Villa Heavy Taxation Abolition Act, we will revitalize returning farming and rural migration and the regional economy in Gangwon, and prepare follow-up policies to increase the residential and living population, moving toward the era of 2 million population in Gangwon."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
