[Viewpoint]Forcing noblesse oblige

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[Viewpoint]Forcing noblesse oblige

Governing and opposition lawmakers are engaged in fierce debate over the revision of the tax system. At the center of the controversy is the comprehensive real estate tax.

The debate, however, is not about the substance of the tax-cut bill. Instead, lawmakers are pointing at each other and saying, “I’m paying this much. How about you?” or “If you own unnecessary properties, you should pay more tax.”

The comprehensive real estate tax was an ideological tool that defines the characteristics of the last administration. Many said universality is a must for the tax system. The comprehensive real estate tax, however, seems to be an exception.

Property tax is a form of payment in return for the administrative services of the local government. But the comprehensive real estate tax sprang from a deformed definition of what national taxes should be.

The Oct. 29, 2003 regulations have gone through further distortions. The comprehensive real estate tax was originally levied on land, but has expanded to include residential properties.

Only one year after its enactment, the tax was strengthened so a house worth more than 600 million won is subject to it, down from the 900 million won initial limit. The tax was originally levied on individuals, but has been revised so that it is now levied per household.

Last year alone, about 1 trillion won worth of comprehensive real estate tax was collected. This year, the government expects about 2.6 trillion won of income from this tax. The administration’s finances have been in the black, so the introduction of the tax can not be understood as a way of increasing its income.

Many argued that the property tax should be strengthened, while the sales tax should be eased. They meant the existing taxes should be reformed to enhance efficiency, and that the taxes on capital gains, acquisition and registration should be eased.

They did not mean that the abnormal comprehensive real estate tax should be created. And yet, the tax was combined with the ideology that decries wealth gaps and regional disparities, and it is now politically impossible to go back.

Some said property owners should be paying more taxes, which is true. That’s why the progressive tax rate was introduced. Under the change, the progressive rate is applied to income tax on salaries and other earnings from interest, as well as to gift and inheritance taxes.

That is the consensus of a civilized society. It is, however, a different story when the government wants to levy tax on income that has not been realized. It is even more problematic when the government wants to apply the progressive rate with its own definition of which properties are taxable.

Each individual has the right to choose whether he or she wants their assets to take the form of real estate, securities, jewelry, art or whatever. If excessive wealth itself is a problem, then it is more logical to levy a “net wealth tax” by adding up all a person’s assets.

Many people stress the importance of moral responsibility under the banner of “noblesse oblige.” Of course, this responsibility of the rich is important, and it should be promoted. The income, gift and inheritance taxes and the medical insurance system of modern society reflect this idea.

Still, forcing the haves to fulfill their moral responsibility by levying new taxes goes against the idea of noblesse oblige.

Moral responsibility should be assumed on your own, but the progressive tax system is a means of regulating those who are not doing so. We commonly hear of people who have huge amounts of money and lots of assets but don’t pay their taxes as they should. In these cases, the government must collect the money it is due under the existing tax system. Tax evasion is a crime, so no one will criticize the government for punishing such a violation.

The inappropriate comprehensive real estate tax, however, has been levied for several years, and its abolition has become impossible. Attempts to ease it face the criticism that they are just trying to benefit the wealthy. Furthermore, the adjustment of the property tax rate, a necessary measure in reflecting the eased transaction tax, also faces criticism, because it can be perceived as a measure to collect more taxes from the have-nots.

The Roh Moo-hyun administration may have thought it successfully coped with a dilemma, but it was extremely unfortunate for this country’s tax system.

What’s been done wrong, however, must be corrected. The governing party, which had promised to ease or abolish the comprehensive real estate tax, is now reluctant to do so, citing the political reality. That is simply cowardly.

A political compromise of gradual change is probably unavoidable, but the National Assembly must reach an agreement on abolishing the comprehensive real estate tax as soon as possible and reforming the real estate holding tax into a local tax with a flat rate.

*The writer is the chief of the editorial page of the JoongAng Ilbo.

by Park Tae-wook
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