[EDITORIALS]Cutting taxes and chains

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[EDITORIALS]Cutting taxes and chains

The government and the Uri Party decided to lower taxes on the acquisition and registration of houses. Tax rates for homes that have already been built will be lowered from 2.5 percent to 2 percent. The rates for planned units ― those sold before construction ― will be lowered from 4 percent to 2 percent. The cuts were made to vitalize stagnant housing transactions. Considering the fact that housing transaction taxes have risen greatly in the past few years, this news is something to welcome.
However, it doesn’t look like the drop in housing transactions will be helped much by these measures. If one buys a 700 million won ($732,000) house, acquisition and registration taxes get cut by about 3 million won. Compared to the “tax bomb” that the government boasted so much about, the slashed price is a temporary plan to patch up problems. Moreover, if one takes into consideration the fact that taxes rose because the tax-levying standard for registration and acquisition taxes went up to 100 percent, from 60 to 80 percent, these latest tax measures aren’t real reductions, but are actually small cuts undertaken only after enormous increases.
It is common knowledge in the market that the reason housing transactions have petered off is not because of registration or acquisition taxes but due to the capital gains tax. Yet the government has left the capital gains tax alone, as if it had sought sanctuary, and thinks that only rustling the “side branches” will have some effect.
The reality is that repetitive policy failures have triggered excessive hikes in housing prices. Naturally, the goal of real estate measures should be the stabilization of housing prices. To make that happen, the government needs to induce more houses to be put on the market. Selling a house, however, is not easy, because a huge acquisition tax stands in the way. It seems now like acquisition taxes are trying to get in through the front door and capital gains taxes in the back ― and both doors are crammed and the house is on fire. Someone should at least open the back door so people who want to sell can come out; as more products make their way onto the market, prices naturally fall.
The order of the day is to increase housing and stabilize housing prices to relieve the burden of acquisition taxes, one by one. We frown on the practice of “punishable tax-levying,” in which people who own just one housing unit are considered speculators and must pay high taxes. The government’s goal should be to curb the price of housing, not to “chain” the owner of the house.
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