Fix the property taxMany could be dumbfounded when they receive the bill on property tax this year. According to a property ownership tax estimate for this year by the National Assembly Budget Office, the government can expect to collect up to 6.1 trillion won ($5.4 billion) in comprehensive property tax and 6 trillion won in estate ownership tax. As a result, tax revenue for 2021 from private real estate wealth could double to 12.1 trillion won from 6 trillion won in 2019.
The rise is mostly attributed to the comprehensive property tax, a kind of surcharge for owning estate beyond a certain threshold. Comprehensive property tax collected from individuals and corporations reached 952.4 billion won in 2019 and 1.52 trillion won in 2020. The number of people subject to the levy totaled 517,000 in 2018 and 667,000 in 2000. This year, the number jumped to 856,000.
The average 1,840,000 won in comprehensive property tax per individual in 2019 increased to 2,280,000 won last year and could surge up to 7,070,000 won this year. Each household will have to pay thousands of dollars for unrealized income. A single home-owner also faces the spike in the property tax if their home value soars beyond the threshold. This cannot be fair to the ability-to-pay principle of taxation.
The ruling Democratic Party (DP) is moving to revise the estate ownership tax. New DP chief Song Young-gil presided over his first real estate policy meeting and removed Rep. Jin Sun-mee as the chair of the party’s real estate special committee. Jin stoked controversy for her inappropriate comments about real estate.
How the moves realize into real action needs to be seen. The DP had discussed the idea of raising the property ownership tax threshold to 900 million won from 600 million won in appraisal value ―and also to 900 million won for comprehensive property tax shortly after the DP’s crushing defeat in the April 7 mayoral by-elections. But the proposal was chucked away after hard-line members opposed any easing of the so-called rich tax.
As seen in the estates from the National Assembly Budget Office, you can hardly expect the effect of a tax cut unless lawmakers address the overly-high comprehensive property tax. Song had been most vocal in the will to ease the tax and housing loans for ordinary people. He must move fast before June 1, the basis for estate ownership tax.