"High Charges, Low Compensation?"...ACRC Calls for Recalculation of 'Land Price' Assessment Criteria

Call for Recalculation of Development Charges Using Same Reference Land as Compensation
Local Government Accepts Commission’s Recommendation, Raising Hopes for Adjustment

The Anti-Corruption and Civil Rights Commission has expressed the view that development charges should be recalculated based on the same reference land used to calculate land compensation. This is expected to correct the unfairness whereby owners suffer losses due to differences in officially assessed land prices.

On the 23rd, the Anti-Corruption and Civil Rights Commission announced that it had issued an opinion to the relevant administrative agency, calling for a recalculation so that compensation and development charges would be assessed using the same reference land. The case involved a situation where different reference parcels were selected to calculate development charges and compensation, causing losses to the owner due to differences in the officially assessed land prices between the reference parcels.

Sejong City, Government Complex Sejong, Anti-Corruption and Civil Rights Commission. Reporter Kim Hyunmin

Initially, the administrative agency had calculated development charges arising from development permits based on a reference parcel with a higher land price. Later, however, compensation for public-interest projects was paid based on a different reference parcel with a lower land price, prompting criticism that the development charges had been excessively collected.

According to the commission, in 2010, Mr. A built two buildings on a forest land parcel that he owned. At that time, the competent local government calculated and notified development charges of 800 million won, using nearby "Land 1" as the reference land. Subsequently, Mr. A's land was incorporated into a construction project to create an industrial complex. When the local government calculated land compensation in May 2018, it used nearby "Land 2" as the reference land instead of the reference land previously applied when imposing the development charges.

Mr. A filed an administrative lawsuit, arguing that "when imposing the development charges, the calculation was based on a reference land with a higher officially assessed land price, but when calculating land compensation, it was based on a reference land with a lower officially assessed land price," and claiming that the compensation had been set unreasonably low compared to the charges. After the court dismissed the case, Mr. A filed a grievance petition with the commission.

The commission's investigation found that Mr. A's land was located about 350 meters away from a two-lane main road. Nearby "Land 1," which was used as the reference land when imposing the development charges, was commercial land directly adjoining the main road, while nearby "Land 2," which was used as the reference land when calculating compensation, was residential land located approximately 180 meters away from the main road. Because the road conditions and land-use status of the two reference parcels were different, their officially assessed land prices in 2010 differed by more than double. The officially assessed land price of nearby "Land 1" was 572,000 won per square meter, whereas that of "Land 2" was only 282,000 won per square meter.

In light of this, the commission expressed the opinion that it would be desirable to recalculate the development charges based on the reference land standard used to calculate compensation that has been finalized by the court, taking into account: (i) that the compensation for Mr. A's land, calculated using nearby Land 2 as the reference land, has been finalized by a court ruling; (ii) that nearby Land 1 and nearby Land 2 differ significantly in road conditions and land-use status, and that their officially assessed land prices as of 2010 differ by more than twofold, making it difficult to recognize objectivity and legitimacy in the selection of the reference land; (iii) that selecting different reference parcels so that taxable development charges are calculated high while compensation for public-interest projects is calculated low cannot be regarded as a fair assessment; and (iv) that the accumulation of surcharge due to arrears on a large amount of development charges has resulted in an excessive tax burden. The competent local government accepted the commission’s decision.

Kim Namdu, Director of the Grievance Affairs Bureau at the commission, said, "The evaluation of private property must be based on the same standards, whether for the purpose of paying compensation or for the purpose of imposing taxes," adding, "Authorities must not cause financial losses to the public by applying different standards in each case."