Constitutionality of 'Moon Government's Comprehensive Real Estate Tax' Upheld... Constitutional Court Says "Public Interest in Curbing Real Estate Speculative Demand is Greater"

The Constitutional Court ruled on the 30th that the Comprehensive Real Estate Holding Tax (종합부동산세, 종부세) law, which expanded the taxable base during the Moon Jae-in administration, does not violate the principle of prohibition of excessive taxation and does not infringe on property rights.

On the same day, the Constitutional Court decided that the provisions of the former Comprehensive Real Estate Holding Tax Act Article 7, Paragraph 1, among others, are not unconstitutional in a constitutional complaint case.

Constitutional Court Chief Justice Lee Jong-seok and other constitutional justices are attending the May judgment announcement held on the 30th at the Constitutional Court in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

Article 7, Paragraph 1 of the former 종부세 law stipulated that those whose combined official housing price exceeds 600 million won are obligated to pay the 종부세. Article 8, Paragraph 1 states that the taxable standard for 종부세 is determined by multiplying the amount exceeding 600 million won in the combined official price by the "fair market value ratio" set by presidential decree. Furthermore, Article 9, Paragraph 4 delegates the calculation of the "number of houses," which directly affects the 종부세 tax rate calculation, to presidential decree.

Claimants who owned houses or land subject to 종부세 taxation as of June 1, 2020, during the Moon Jae-in administration, argued that these tax provisions violated the principle of legality in taxation and the principle of comprehensive delegation. In particular, they claimed that applying excessively high tax rates to multi-homeowners violated the principles of prohibition of excessive taxation and equality.

However, the Constitutional Court dismissed their claims and ruled that these provisions do not infringe on property rights. The Court stated, "The public interest gained by curbing excessive real estate holdings and speculative demand for real estate, thereby stabilizing real estate prices, protecting actual demanders, and promoting sound development of the national economy, outweighs the limited private interests."

Regarding the provisions on heavy taxation for multi-homeowners, the Court added, "Considering that, in reality, the economic capacity of multi-homeowners or owners of high-priced houses is likely higher than that of single-homeowners or non-homeowners, there is a rational reason for treating those owning two or fewer houses differently from those owning three or more houses or two houses in regulated areas under the housing portion of the 종부세 provisions," and concluded, "The housing portion of the 종부세 provisions cannot be said to violate the principle of tax equality."