[EDITORIALS]For better real estate taxation

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[EDITORIALS]For better real estate taxation

Until now, it was highly unfair that property taxes were levied according to area instead of price. An owner of a smaller apartment that cost more than a larger apartment would pay less property tax just because of the size.
It was therefore completely reasonable when the government decided to impose taxes based on the price of the house rather than the space. This is the background to why property taxes on expensive apartment houses in Seoul’s southern Gangnam district were raised.
Acting upon homeowners’ anger that followed the sudden sharp increase in property taxes, the Gangnam district council recently passed a draft bill that would cut property taxes by half. The council said that it was just executing what legal rights it held.
Homeowners are claiming that it is unreasonable to have to pay several times the amount of taxes that they have been paying so far. From one point of view, their logic is somewhat persuasive. But the bottom line is that the modification made to the tax system aims at equilibrium. The Gangnam area was the contact detonation that set real estate prices soaring last year. Raising property taxes is inevitable in order to prevent such price surges from happening again.
People can criticize the Gangnam district council for being hypocritical. These tax measures were taken to straighten out the property tax system, which was in many ways faulty. We must therefore accept and endure for the time being.
Property taxes imposed on apartments that cost over 900 million won ($770,000) rose from 120,000 won to about 740,000 won. This rise, nonetheless, only amounts to 0.8 percent of the standard market price.
Responding to the opposition, the Ministry of Government Administration and Home Affairs said that it would seek a reduction of local governments’ rights to set property tax rates. The ministry is also considering taking away all such powers from local administrations. This is because the disproportion of certain regions is too extreme to be left as it is.
Also, if tax authorities are going to increase property taxes, they must cut real estate transfer taxes. The tax system should aim to raise taxes on property while relaxing those involved in its sale or purchase.
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