[EDITORIALS]Property tax reform planThe government has announced that it will adjust the tax base to raise real estate-related taxes, such as property taxes and aggregate land taxes. The tax adjustment is the government’s second bid to tame real estate speculation, coming on the heels of a ban on the resale of construction and distribution rights in newly designated cities.
Our real estate sales tax system has a serious problem. Taxes on Gangbuk apartment houses are almost the same as those on upscale Gangnam apartment houses that sell for three or four times the price. The sales tax on a 10 million won ($8333) car can be higher than that of an apartment house costing hundreds of millions of won. Such distortion and imbalance comes from the fact that tax bases are different for every area and that they reflect only about 30 percent to 33 percent of the real market price. The low taxes on real estate make it the ideal object of speculation.
Governments in the past pursued numerous adjustment plans, including the Kim Young-sam government, which announced that it would hike the tax base by nearly 60 percent by raising it 3 percentage points every year, but gave up when faced with vigorous protests from real estate owners.
The central government declared that it will take the property tax and the aggregate land tax, which are local taxes, and turn them into national taxes, but this will fire the opposition of local autonomy groups and go against the expansion of local financing. It would also be a problem if the adjusted tax base leads to addition tax burdens for lower-income families. Measures to discriminate between families with one house and families with more than one house should be examined. The government should also consider lowering other duties, such as acquisition and transfer income taxes, in order to lessen the tax burden after adjusting the assessment standards.
The government should work with determination to resolve the distortion of the standard of tax assessments once and for all and set up a thorough plan that will prevent it from abandoning its efforts halfway down the road as it has so often done.