Real estate tax increase proposedIf the government accepts a proposal made by a presidential commission on Tuesday, taxes on owners of multiple properties and more expensive real estate could rise sharply next year.
The Presidential Commission on Fiscal Reform on Tuesday picked the toughest among four possible changes to the comprehensive real estate tax. The change will raise both the rate at which the government appraises homes for tax purposes and the tax rate itself.
The comprehensive real estate tax is a national tax levied on owners of multiple properties and more expensive real estate. It is separate from the property tax levied by local governments.
The commission decided to propose that the government raise its appraisal rate by 5 percentage points every year over the next four years from the current 80 percent and raise the tax rate by 0.05 percentage points to a 2.5 percent. The lowest tax rate will remain at the current 0.5 percent.
According to the proposed change, homes subject to the comprehensive real estate tax will be assessed at 100 percent of their government-assessed value by 2022. For landowners, the current tax rate range, which is 0.5 percent to 2 percent, will be raised to 0.7 percent to 3 percent.
Currently the taxable amount is 80 percent of the government assessed value. This has been considered too low, as the government-assessed value is only between 60 and 70 percent of actual market value.
The commission has also recommended of taxing 10 million won of annual financial income including deposit interest or dividend payment . This is lowered from the current taxation on financial income of 20 million won or more.
The commission estimated that 346,000 people, including 274,000 apartment owners, will be affected by the new comprehensive real estate tax.
People who own a single apartment worth between 1 billion and 3 billion won will see their taxes rise by as much as 15.2 percent. Those with multiple apartments will see an additional hike of 6.3 percent to 22.1 percent.
Under the plan, the government will see a 56.1 percent increase in its real estate tax revenue for next year, from 1.94 trillion won to more than 3 trillion won.
The extra tax collected from apartment owners is estimated to grow by 18.3 percent to 579.9 billion won and from land owners by 2.44 trillion won. This would be a 68 percent increase over current tax revenue.
The financial income tax change is expected to increase the number of people that will be subjected to the tax from 90,000 to 400,000.
Taxes could also be raised further as the government is also considering changing the way it assesses property value to more accurately reflect the market. If so, property owners’ tax burden will increase further.
“The proposal was focused on realizing justice in taxation through a rational taxation system that not only enhances fiscal transparency but also improves accountability and fiscal policy,” said Kang Byung-goo, the leader of the presidential commission.
The government will look into the proposal and decide whether to include it when it announces its own proposed changes to the comprehensive real estate taxes later this month. The bill will then be sent to the National Assembly for a vote. If it passes, it will go into effect starting next year.
BY LEE HO-JEONG [firstname.lastname@example.org]