Toward fairer taxationHan Seung-hee, nominated to head the National Tax Service (NTS), expressed a determination to get to the bottom of real estate speculation at Tuesday’s confirmation hearing at the National Assembly. Asked by lawmakers about his policies if he passes the screening by the legislature, Han, a former CEO of the Korea Money Brokerage Corp., said that he fully agrees with the need for the tax office to strengthen investigations into speculative home buyers, impose taxes on lease incomes from owners of multiple homes, and reinforce taxation on a large amount of funds used for jeonse, a type of long-term rental contract common in Korea.
Despite the need for taxation on unearned income from real estate, that sector has long been a tax haven for the rich in Korea. Market analysts criticize the loopholes and say tax authorities could not effectively prevent rich people from bequeathing their fortunes to their offspring without paying tax. Such lax oversight failed to put the brakes on overly heated property markets. After the confirmation hearing, however, the new government’s tax policy has become clearer.
Most noteworthy is Han’s commitment to expand the scope of probing suspicious sources of money for jeonse from real estate worth over 900 million won ($792,254) to properties worth less than that. The move will surely lead to more tax revenues for the cash-strapped Moon Jae-in administration. In fact, rich Koreans were able to hand down their wealth to their children without paying any tax even though their act of arranging a 300 million-won to 900 million-won jeonse payment for their children constitutes a donation that is subject to taxation.
There is also a strong need for taxation on 1.87 million multiple home owners, as only 2.6 percent of them reported their income from rents. Moreover, the government’s taxation of rental incomes of less than 20 million won a year is put off until next year. Tax authorities should narrow the scope of taxation to those with four to five houses. Han also said he would thoroughly execute taxation on as many as 200,000 religious people from 2018.
Fortunately, lawmakers could not find any problem in Han’s past. As a result, they could concentrate on his qualification as chief of the tax office. We hope Han implements the new government’s tax policy as best as he can.
JoongAng Ilbo, June 28, Page 30