Good riddance to unfair taxThe government is mulling broad property tax cuts in the midst of a staggering economy.
Under the scheme, property tax rates for multiple-home owners and companies will be rolled back to former levels, which means they will no longer have to pay assessment taxes when selling additional homes or non-business properties.
The current real estate tax is the last of the property tax measures initiated by the Roh Moo-hyun administration to curb real estate speculation.
It is a cumbersome tax that ground the real estate market to a halt.
We have repeatedly said that the there should be two principles for a property tax.
First of all, taxes should not be employed as a tool to quell real estate speculation or control a fluctuating economy.
Tax measures that were aimed to ease speculation have failed. All they have done is seriously hamper the market.
Secondly, taxes on homeowners should be levied according to the size and capacity of the owner, but the transaction taxes should be reduced drastically.
We believe that lifting the sales tax will revitalize the listless property market. We don’t believe that taxes should make property owners reluctant to dispose of their assets.
The government of former President Roh Moo-hyun completely ignored basic market principles and went entirely in the opposite direction.
Roh had repeatedly used taxes to control the real estate market, which kept transaction rates practically the same, but dramatically hiked up ownership taxes.
Roh’s government then raised the transaction taxes by levying steep taxes on capital gains from property sales.
Targeting the wealthy, the past administration also concocted a so-called comprehensive real estate tax, practically bringing the real estate market to a standstill and leaving a trail of victimized taxpayers.
President Lee Myung-bak has promised to fix the tax system right from the start of his term. His administration first reduced ownership taxes and is now poised to fix the transaction tax, or capital gains tax.
Its next mission will be to scrap the comprehensive real estate tax altogether, or turn it into an asset tax. We hope the government will use this opportunity to revamp the entire home ownership tax system.
But one worry is that this government appears to be using the property tax as an expedient to spur the economy.
We repeat once more: Property taxes should no longer be employed as an economic tool.