Gov't revenues tumble as real estate tax returns halve

Economy

Published: 29 Nov. 2023, 19:02

Gov't revenues tumble as real estate tax returns halve

A worker at Gangnam Post Office in southern Seoul sorts out bills for the comprehensive real estate holding tax on Wednesday. [YONHAP]

The government will see its revenue for the comprehensive real estate holding tax halve this year, owing to a lower tax rate and declining assessed value of properties.

The Ministry of Economy and Finance said Wednesday that an estimated 412,000 people will be required to pay a combined 1.5 trillion won ($1.2 billion), marking a sharp decrease from last year’s 1.2 million people paying 3.3 trillion won.

Those subject to the real estate tax are down 65.5 percent compared to the previous year, and the size of the tax is down 54.5 percent.

The declining rate in the number of people taxed is the largest since comprehensive real estate taxing was introduced in 2005.

The size of the tax is also equivalent to the level in 2020, one of the objectives stated by Finance Minister Choo Kyung-ho.

“The current government has pushed to relax taxing to a reasonable level since its inauguration,” explained the ministry in a statement.

“The reduction in the tax rate and larger deductions have come into effect starting this year,” the ministry said.

The Yoon Suk Yeol administration not only lowered the corporate tax to the pre-Moon Jae-in government levels but also addressed the comprehensive real estate tax.

It raised the bar on the comprehensive real estate holding tax from 1.1 billion won to 1.2 billion won for single homeowners for this year, and from 1.2 billion won to 1.8 billion won for joint-owned properties among married couples.

With the change in the threshold, 124,000 fewer single homeowners became subject to the real estate tax this year, representing a 53 percent decrease.

The comprehensive real estate tax is separate from the property holding tax levied by the district offices. The tax was first adopted in 2005 as a means to tame the overheated housing market.

Still, the lower real estate tax revenue could pose a challenge to the government’s already dwindling tax revenues.

The ministry estimated in September that Korea will collect 59.1 trillion won less in tax this year than initially estimated due to waning corporate profits and the downturn in financial markets.

Under the revision, the year's tax income will come at 341.4 trillion won, down 14.8 percent compared to the initial projection of 400.5 trillion won.

The shortfall is attributed to falling tax revenues in the first six months as export-oriented Korean companies like Samsung Electronics and SK hynix took a hit from sluggish demand for chips and electronic devices.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]