Future of Sejong Institute looks destitute with latest tax billA prominent domestic think tank has been hit with a total real estate tax bill of 2.7 billion won ($2.3 million) this year, raising serious questions about its fiscal viability and broader questions about its management.
The Sejong Institute, a prominent policy think tank, is due to pay 500 million won in property tax and 2.2 billion won in comprehensive real estate tax this year.
The comprehensive real estate tax is a national tax targeting expensive residential real estate and some kinds of land. It is separate from property taxes levied by local governments.
At the heart of the sudden hike in the Sejong Institute’s tax bill is an athletic field in Seongnam, Gyeonggi, owned by the think tank which it intends to develop into a research complex to be leased out.
Although the Sejong Institute obtained a permit from the city for commercial development of the land in March 2019, the change in its registered purpose to commercial usage made it subject to higher taxes according to its government-assessed value before the think tank could find a developer, let alone paying tenants.
The increase in the government’s assessed values of real estate is the major reason behind the jump in real estate taxes on property owners in the past two years.
Although taxes on land and homes are based on the government’s annually assessed value instead of its market value, the average government-assessed value of land and houses rose 19.08 percent across the nation this year, the sharpest on-year spike in 14 years.
The government plans to raise its assessed prices for all types of real estate, including apartments and land, to up to 90 percent of their market prices over the next 10-15 years.
However, for a private foundation such as the Sejong Institute, which has no reliable business to generate revenue, the elevated property tax spells serious trouble in the near future.
Sejong’s annual operating costs amount to 7-8 billion won, while only 32 billion won remain in the institute’s coffers.
Should real estate taxes on the think tank’s properties stay the same or rise, the institute’s funds are likely to be completely depleted within four to five years.
The Sejong Institute was founded as the Ilhae Foundation in the aftermath of the 1983 Rangoon bombing, when an explosive planted by North Korean agents in an attempt to assassinate visiting South Korean president Chun Doo Hwan killed 18 South Korean officials and journalists.
The think tank’s main mission is to conduct research into foreign policy and inter-Korean relations. It also continues to support the families of those killed in the Rangoon bombing incident.
Insiders at the think tank attribute the looming crisis to flawed short-term fiscal planning by the institute’s management, where top appointments are controlled by the Foreign Ministry and change with each new government.
Former employees of the Sejong Institute who spoke to the JoongAng Ilbo on the condition of anonymity said that the think tank’s chiefs were usually not concerned with long-simmering problems with its finances, preferring to “pass a ticking bomb to the next person in charge,” as one employee described the situation.
BY MICHAEL LEE [firstname.lastname@example.org]
with the Korea JoongAng Daily
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