Gov’t rakes in windfall from real estate sales

The government collected more taxes in the first two months of this year than 2017, as owners of multiple properties scrambled to sell real estate before a tougher capital gains tax went into effect at the beginning of April.

According to the Ministry of Strategy and Finance, in the first two months of this year the government collected 49.9 trillion won ($46.9 million) in taxes, which is 3.7 trillion won, or 8 percent, more than the previous year.

The government has achieved 18.6 percent of its tax collection target for this year, 0.2 percentage points higher than the first two months of last year.

The government collected 16.9 trillion won in income taxes, 1.8 trillion won more than a year ago, thanks to capital gain taxes on real estate transactions.

The increase in tax collected from real estate transactions during the first two months of the year was largely the result of rushed apartment sales in anticipation of the government’s tougher capital gain tax, which it introduced this month.

The new capital gains tax levies heavier fees on owners of multiple apartments.

It ranges between 6 to 42 percent and tacks 10 additional percentage points on for those that own two properties in all of Seoul, Sejong, seven cities in Gyeonggi and seven districts in Busan, where the government believes real estate speculation is overheated. For those who own more than three properties, that burden goes up to 20 extra percentage points.

President Moon Jae-in has been trying to cool the real estate market since he took office in May last year using regulations, including tightening loans. However, the market was reluctant to respond. The government saw the market, which was pushing up prices in the affluent Gangnam districts of southern Seoul, as the result of owners of multiple properties using them as investments.

According to the government, there were 28,459 real estate sales last month alone, a 42 percent surge. Another study by the real estate information provider Budongsan 114 showed that 16 percent of the apartments sold in the first quarter of the year went for over 900 million won.

As the higher capital gain taxes went into effect in April, the government believes tax collection will be strong until March. It could drop sharply in April as sales are expected to slump.

The government collected 1.4 trillion won from security exchange taxes, more than double the 600 billion won collected a year ago.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]