As discussions continue over reforms to property taxes, including ownership taxes and comprehensive real estate taxes, attention is turning to the new government's direction on tax policy. There is a general consensus on the need to protect genuine homebuyers while curbing speculative demand, but opinions vary on how much to strengthen ownership taxes and how to reform the comprehensive real estate tax system.
On July 23, a national forum on real estate policy, chaired by President Lee Jae-myung, addressed these tax reform issues aimed at stabilizing the real estate market. The government plans to incorporate the feedback gathered during the forum into its tax reform proposals.
Key issues surrounding the property tax reform include: adjustments to the long-term holding special deduction, strengthening ownership taxes, and revising the comprehensive real estate tax assessment criteria. During the forum, President Lee expressed his commitment to strengthening ownership taxes.
Ownership taxes consist of property taxes and comprehensive real estate taxes. Over time, tax rates, fair market value ratios, and deduction criteria have been adjusted multiple times based on market conditions and policy directions, leading to criticisms about the predictability of the system.
Currently, the existing system determines tax burdens based on the number of homes owned and their assessed values, which can result in different tax burdens for assets of equal value. A major point of contention is how to differentiate between homeowners who occupy their properties and investors who own multiple homes.
Professor Kang Seong-hoon from Hanyang University suggested, "We need to examine whether the burden of ownership taxes in our country is appropriate compared to major countries and consider applying tax rates based on housing value to ensure fairness in taxation." He emphasized that it is preferable to tax based on the value of owned assets rather than simply the number of homes owned.
During the forum, there were also calls to limit excessive tax benefits for owners of high-value single homes, with suggestions to set the threshold for high-value properties at 3 billion won (approximately $2.3 million).
Conversely, opinions online were divided on whether to strengthen taxes on high-value single homeowners to reduce the preference for owning a single high-value property, with some cautioning that taxing unrealized gains could shift the tax burden onto tenants.
Regarding the criteria for the comprehensive real estate tax, similar views emerged from both the forum and online discussions. Lee Hyung-il, Vice Minister of Finance, noted, "There was a consensus during the forum that it would be preferable to eliminate the differential based on the number of homes owned and instead tax based on the total value of the properties owned, which was generally supported online."
On the issue of differential taxation for non-resident single homeowners, there were suggestions to strengthen residency requirements and increase tax burdens for those who do not actually reside in their properties. While some supported this view, others argued that distinguishing between genuine demand and speculation based solely on residency is challenging, and there are unavoidable cases where individuals cannot reside in their homes.
The reform of the long-term holding special deduction was also highlighted as a key issue. Participants suggested maintaining tax benefits for long-held properties but emphasized the need to place greater importance on actual residency duration. The idea is to redesign benefits to focus on actual occupancy rather than merely the length of ownership.
Experts generally agreed on the necessity of tax reform. Jung Se-eun, a professor of economics at Chungnam National University, stated, "We must strongly reform the tax system to prevent speculation. While we have drawn the sword from its sheath, we must not let it become excessive. We should protect genuine residents and define high-value properties as those worth over 1 billion won (approximately $760,000)."
The government plans to develop a property tax reform proposal based on the feedback provided during this forum. However, since ownership taxes, comprehensive real estate taxes, and long-term holding special deductions directly impact tax burdens, further discussions are expected.
* This article has been translated by AI.
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