[EDITORIALS]A needed change in taxation

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[EDITORIALS]A needed change in taxation

The government’s assessed valuations of some 135,000 independent houses, which will provide the standards for the assessment of 4.5 million houses for tax purposes nationwide, have been made public, a first for Korea. Following the example of apartments, a systematic standard for assessing the value of independent housing units is being set. Once its effects settle in the market, imbalances in taxation due to failures to reflect market prices are expected to be greatly reduced. Under the new system, there may be property tax increases, but that is unavoidable if market prices are to be reflected in tax assessments.
Despite its positive aspects, the new measure is expected to face considerable tax potests. First of all, taxes on property transactions, such as capital gains and registration taxes, will increase drastically. As the standard for taxing real estate sales rises from 30 to 40 percent of market price to 80 percent, the overall tax burden will increase two to four times more than that of last year, even if the registration tax is lowered. Taxes will go up not only for owners of high-priced housing units in Seoul, but for common people in the provinces. This means that independent houses, already an unpopular housing choice, will become even more so.
To stabilize prices, the government must encourage owners of more than two houses to sell their extra units and stimulate the market. The new measure, however, makes it impossible to sell even if one wants to. Not only for the real estate market, but for the overall economic recovery, this is a vital blow. Nor does it conform to the original goal of lowering taxes on transactions while raising them on possession. We have to give the real estate market breathing space. To do so, we have to reduce the burden on sales. Compared to apartments or land, the factors that determine the prices of independent houses are much more complicated. Though the government limits this year’s possession tax to less than half of last year’s, there will be a rush of objections from taxpayers.
Stabilizing the real estate market and maintaining a balance in taxation are necessary. But they should not be pursued to penalize the rich. Excessive tax burdens will soon bring tax protests. Moreover, the government should not delay an economic revival, which would hurt the common people. Making assessed housing valuations public will work once these problems are addressed.
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