[EDITORIALS]Bubble tax needs deflating

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[EDITORIALS]Bubble tax needs deflating

Some politicians are calling for a cut in the composite real estate tax. Uri Lawmaker Byun Jae-ill said the threshold for imposing the composite real estate tax needs to be re-examined as the number of people who are required to pay is increasing. It is wrong that house owners have to pay more of this “bubble tax” simply because of a social phenomenon, such as a house price boom, he added. The Uri Party explained that this is not their official stance but it seems certain that some inside the party will raise their voices against the tax. The Grand National Party is reportedly reviewing ways to raise the tax base from 600 million won ($640,000) to 900 million won. The party has also thought about changing the way the tax is imposed. Under the current system, the number of houses that a household owns is put together to be used as its tax base. But the party refuses to count the number of houses that each individual owns when imposing the tax.
Last year, when the government announced its real estate policy in August, it emphasized that the people required to pay the composite real estate tax would be only 180,000, or 1.7 percent of the population. The government meant that it would impose a punitive tax on less than 2 percent so the majority of the people who were not engaged in speculation did not need to worry. But things have since changed. Early this year, as real estate prices went up, the number of people paying the tax had risen to 350,000, which is more than double thanwhat was expected. Next year, the people who need to pay the tax will likely exceed 500,000. Each year, hundreds of thousands of people are labeled as speculators and obliged to pay heavy taxes although they are not speculators, just home-owners caught up in a market bubble. The government cannot have expected the number of people who have to pay to increase this much. That is why there should be a serious debate on whether the tax base of 600 million won is appropriate. That number was not decided through either accurate analysis of the data or through political consensus. As such, the figure has been problematic from the beginning.
The government should adjust the tax to a realistic level. Limitation of the composite real estate tax should be studied as well. Now the composite real estate tax is a national tax and the property tax is local; they should be unified as a local tax. A progressive tax system should be introduced so that people who own more expensive houses pay more tax. That is a better way to impose a holding tax.
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