[EDITORIALS]Tinkering with taxes

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[EDITORIALS]Tinkering with taxes

The government has taken a series of hard-line measures to curb real estate speculation. It has raised the basic values of real estate that are used by the National Tax Service to assess capital gains and inheritance taxes. Now, it has presented a plan to raise the property tax drastically. If the plan is implemented, the property tax will be raised an average 10 percent. The increase rate will differ from region to region: That of Seoul’s Gangnam area will be doubled on average, but some neighborhoods may see a sevenfold increase. Meanwhile, in some areas, the rate will drop by 30 percent.
The property tax is assessed on the basis of floor space now, so the owners of bigger apartments in the provinces had to pay higher taxes than those owning a smaller but more expensive apartment in Seoul’s Gangnam district. In other developed countries like the United States, property owners face heavy property tax, and that works against speculative investments.
But the main problem here is that the government’s tax policies are often changed abruptly. Real estate speculation should be prevented, but it is not right to persecute owners of several properties as if they are criminals. It is not desirable, even for real estate price stabilization, to drive owners to a situation where it is difficult for them to either sell or keep their property. And Seoul should remember that earlier plans to rationalize the assessment standards failed because of resistance to high taxes.
If property taxes rise, acquisition taxes, registration taxes and capital gains taxes must be lowered. Local governments in the provinces, whose tax base will fall under the new rules, should be compensated. The tax system must be streamlined so that the average tax burden is not raised. When the government changes the tax system abruptly, thinking only of speculation, it will meet strong resistance. Although Seoul’s plan needs some fixing and complementary measures, local governments must cooperate with the central government to move real estate taxes and the taxation system in a more rational direction.
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