Don’t confuse the market

Suh Seoung-hwan, minister of land, infrastructure and transport, said in a breakfast meeting with housing and construction companies that the government was mulling tax breaks for landowners who have more than three real estate properties. He said the government’s plan to apply the lowest fixed rate, 14 percent, on rental income of up to 20 million won ($19,690) per year for a maximum of two properties could be extended to homeowners of more than three. He said levying taxes according to the number of homes owned was not fair. He didn’t specifically refer to the February real estate measures for taxing rental income, but few would interpret it beyond that. The extension in tax breaks has been demanded by housing and construction companies desperate for a breakthrough in the sluggish market.

The minister in charge of real estate affairs can comment on taxation when addressing the industry. But he should have checked himself before giving hope and messages to the market until a policy decision has been made from inter-government consultation. The Finance Ministry denied that breaks for multi-home owners or any revision in tax rates on rental incomes have been discussed. The land minister has spoken regarding a taxation matter that is beyond his jurisdiction. He may tone it down and say that it is his private opinion, but a comment from a minister in a public meeting cannot be so easily ignored. Even if it is a matter his ministry has been silently campaigning for, Suh has been rash in sharing the information without prior consent from the Finance Ministry.

However, Suh is not wrong in his reasoning for fair tax rates on rental income regardless of the number of properties owned. But a public policy should not be released before thorough review and intergovernmental coordination. It could end up differently after government and legislative review. Public policy can cause unnecessary noise and confusion in the market and lose credibility if it is not carried out in the way that was expected. It also could cause conflict within the government. Taxation is a sensitive matter. The plan of levying a tax on rental incomes has already stirred enough confusion in the market and the minister has fanned the flames with his indiscretion.

JoongAng Ilbo, June 9, Page 34