Price of dodging real estate taxes: W104.8 billion
The National Tax Service on Thursday fined 633 people a combined 104.8 billion won ($97.5 million) for evading taxes on real estate transactions.
The number represents nearly three-quarters of the individuals that the tax agency has been auditing since August for tax evasion in real estate sales. Another 210 people are still under inspection.
The audit has focused on areas where real estate prices have been skyrocketing despite government efforts to curb what it sees as an overheated market, especially in the posh southern Seoul neighborhoods of Gangnam. The tax agency has trained its eye on suspicious transactions where it’s not immediately clear that buyers can afford the expensive apartments.
The National Tax Service on Thursday also released a list of 532 more people that it plans to audit this month as the real estate market, which seemed to be cooling off in the middle of last year, has begun to pick up again.
Among the people under audit, one 50-year-old woman, according to the tax agency, was able to buy apartments and commercial space worth 4 billion won in hot areas of Seoul and Sejong in the past six years.
The agency suspects her of dodging estate taxes by hiding an inheritance from her wealthy husband.
Another 36-year-old woman who purchased four apartments, including one in Gangnam, worth a combined 2.5 billion won in the past three years - despite having no apparent income - is also under investigation for illegal inheritance.
There was also a 41-year-old man who omitted some of the earnings he made that were reported to the tax agency, and used it in purchasing a high-valued apartment.
One of the most common methods of tax evasion was selling a property to a family member but hiding relations to avoid an inheritance tax.
Another common practice was reporting a lower property value on the contract in hopes of reducing the capital gains tax for the seller and acquisition tax for the buyer.
For future investigations of possible inheritance fraud, the National Tax Service plans to focus on real estate transactions above 400 million won and buyers under the age of 40, whom the tax agency believes have less financial means to purchase homes on their own.
While the National Tax Service mostly deals with tax compliance, its role has become more pronounced since the government has embarked on an effort to cool the real estate market, which includes tightening loan access and cracking down on tax cheats.
“The National Tax Service is not the main agency to lower real estate prices,” said Lee Dong-shin, head of the property tax bureau, “but the possibility of tax evasion has increased with the surge in real estate values.”
Apartment values in Seoul have especially been reaching new heights. According to Budongsan 114, a real estate information provider, the average apartment price in the capital has reached a record 21.8 million won per 3.3 square meters ($573 per square foot) this month.
That’s twice the average real estate value in Gyeonggi, located just outside of Seoul.
In September, one month after authorities unveiled their toughest standards yet on lending real estate prices remained in the 20 million won level in Seoul and the 10 million won level in Gyeonggi.
In popular Gangnam District, the average price this month is now 42.1 million won per 3.3 square meters.
In nearby Songpa District, it has exceeded 30 million won for the first time.
Concerned about the continuous rise, the government has been mulling additional steps, including raising property taxes.
During a radio interview on Tuesday, Finance Minister Kim Dong-yeon said raising property taxes, especially on those who own multiple homes, is the most valid move since Korea’s property taxes are relatively low compared to other countries.
“The problem is other regions other than Gangnam will also have to be subjected [to the higher property tax],” the minister said.
BY LEE HO-JEONG [email@example.com]