[EDITORIALS]Being realistic about taxesThe government has presented a draft bill for restructuring real estate taxes. Introduction of a new aggregate real estate tax and changing the standard of tax assessment to reflect market price are the main points. Considering the lukewarm attitude the government has shown so far, the draft is rather strong. Though in a limited area, the Gangnam district in Seoul, real estate prices have started to soar again. It has often been said that the tax on possession must be increased rather than the tax on transactions, to control speculation. If the bill is introduced in the belief that speculation will be controlled if a small number of large-scale real estate owners are checked, the policy will prove to be full of intent but without effect.
Actualization of the tax base had been pursued by previous governments, but it still remains the most difficult problem, since all previous attempts were foiled. Under the current system, the tax on transaction is heavier than that on possession. This resulted in transactions contracting while prices increased. If prices are reflected in real estate taxes, the tax imbalance between apartments in the expensive Gangnam area and the relatively cheap Gangbuk area will be corrected.
There are also problems. Tax base increase is not only a concern of the affluent few, but of ordinary people. A simple tax increase can only increase the burden on the actual consumer. The burden on households with only one house should not be heavy. Before the actualization of the tax base, overall rates should be adjusted.
Installation of a new aggregate real estate tax, which will levy graduated taxation on large-scale property owners, is not that easy. Already there are signs of resistance. There are at most 100,000 people levied with more than 1 million won ($851) in real estate tax. It is difficult to imagine much increase in revenue even if these people are taxed heavily. Aggregate real estate tax is, therefore, more focused on balance than on controlling speculation. If controversy over tax resistance grows while actual gain is small, the policy will fail. Instead of showing a big target, the government must gauge its gains discreetly.