[EDITORIALS]Take care on property tax planThe outlines of a new comprehensive real estate tax system, which will go into effect next year, have emerged. Those subject to the new system will be those who own a house worth at least 900 million won ($810,000), based on the standard price set by the National Statistical Office, and land valued at 600 million won or more, based on the standard price set by the Ministry of Construction and Transportation. The government estimates about 60,000 people will be subject to the new tax.
The government should rightly step up its effort to prevent real estate speculation. Also, an additional tax on an excessive number of properties or on windfall profits is called for. But the means used should not violate the law or go against market principles.
In that sense, the new real estate tax system has several problems. Among other things, the concept of the central government levying additional taxes on top of the property tax levied by the local government on a single property may violate the constitution.
There is criticism that double taxation of unrealized gains is an excessive measure. We also doubt whether the National Tax Service has sufficient manpower to deal with the new tax system. In addition, more than half of those subject to the new taxation are residents of the Gangnam district in southern Seoul, raising speculation that the government is specifically aiming at “the rich in Gangnam.”
The Ministry of Finance and Economy, while reducing the property registration tax to 2 percent from the current 3 percent, did not do the same for the property purchase tax. The problem with the current real estate market is that there are no transactions. A person who owns a high-priced apartment in Gangnam, for example, has no incentive to sell the apartment because of the high transaction taxes involved.
If the government means to increase the burden of owning higher-end property, it should at least provide a way out for those who might want to sell that property.
The heads of local governments are already up in arms, claiming that the new taxes are unconstitutional. There is a precedent in which a government policy to collect taxes on any surplus gains on property, in order to rein in speculation, was ruled unconstitutional and halted. The new system might end up the same way, wasting money and energy, if the government does not thoroughly study the possible fallout and draft the necessary measures.