[EDITORIALS]Boxing taxpayers in

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[EDITORIALS]Boxing taxpayers in

The government seems to have decided on the outline of a comprehensive real estate policy. The administration and the governing Uri Party are said to have agreed to increase real estate taxes drastically ― either by raising the ceiling on the tax or by eliminating it altogether ― and to lower the threshold for imposing the harsher combined tax assessment on high-priced housing units, from the current standard of 900 million won ($872,000) to a much lower figure. As for multiple house owners, the government is discussing a way to increase the tax rate on capital gains in a big way by applying elastic rates.
It seems the government is faithfully following President Roh Moo-hyun’s recent remark on taxation principles: “It is fair to impose heavy real estate taxes on those who persist [in holding real estate], and to collect all sale profits through the capital gains tax.” We think it right and necessary for the government to control excessive real estate profits by exercising its authority to tax. But the policy under discussion worries us for several reasons.
First of all, suddenly raising the ceiling on the real estate tax, and doing so without implementing the combined real estate tax system, will jeopardize the stability of the tax system. Originally, the administration and the Uri Party decided to limit their tax increase to 50 percent of the previous year’s levy, because they thought a rapid increase in the tax burden was not desirable. Since the situation has not changed in the meantime, we are curious to know why they intend to change the assessment standard.
The government should also be discreet about lowering the threshold for imposing the combined tax standard. If the government lowers it to 600 million won, as some civic groups demand, people who own a 30-pyeong (99-square-meter) apartment will have to pay the combined tax. If, on top of this, the ceiling for the tax is eliminated, the tax burden could suddenly triple or quadruple. Excluding multiple house owners and wealthy people with a lot of land, if single house owners have to pay a huge tax bill because the value of their houses have risen, it will violate the principle of balanced taxation. The government shouldn’t frighten people under the pretext of rooting out speculation.
Raising the real estate tax and the capital gains tax simultaneously is like bashing someone while blocking his way out. Unless it is being done for punitive reasons, it cannot be considered a fair policy.
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