[EDITORIALS]Property tax problemsThe government has decided to reduce taxes on property transactions while greatly raising standard appraisal prices for calculating property ownership taxes in accordance with reality. This is the right decision, since it promotes fair taxation and deters real estate speculation.
Nobody will feel free to ignite real estate speculation if owning property becomes a heavy burden. The property tax system in Korea has many problems involving fairness. The standard appraisal price is 30 percent of the market price in buildings, 33 percent in land. When the ownership tax of an apartment worth a few hundred million won is slightly less than the tax on owning a mid-size car, it is difficult to persuade people not to leap at owning a house. In the United States, the property ownership tax is 98 percent in the total real estate tax revenue. Japan and Britain are not noticeably different from the United States.
Words come easily, but raising the property ownership tax is not easy. It is almost impossible to find someone who welcomes a tax hike. The Kim Young-sam administration had a plan to raise the standard appraisal price to more than 60 percent of the market price in five years. But the plan failed.
If the government does not want to fail again this time, it has to first fix contradictions and the unfairness in the existing standard appraisal price system for property taxes. An apartment south of the Han River is twice or three times more expensive than an apartment north of the Han River, even if both apartments are the same size and share other attributes. But the property ownership tax for the both apartments is almost identical.
Property ownership tax should not be entirely under the jurisdiction of local governments. Raising the ownership tax can be a great pain for a family owning only a house. Whether the government succeeds in raising standard appraisal price will solely depend on whether the government will be able to prepare persuasive and rational steps to carry out this ambitious plan.