The government is expected to announce a tax reform plan by the end of this month, which may shift the property tax system from being based on the number of homes owned to focusing on the value of those properties. The aim is to enhance tax equity by ensuring that individuals with similar asset values pay comparable taxes, regardless of the number of homes they own. However, there are concerns that this could exacerbate the trend of concentrating wealth in high-value properties, known as the 'one good house' phenomenon.
According to relevant authorities, the government plans to unveil a tax reform proposal that includes strengthening property taxes as early as the end of this month.
The current property tax system consists of local property taxes and the national comprehensive real estate tax (known as 종부세). The 종부세 applies different tax rates and deductions based on the number of homes owned. This has led to situations where individuals owning a single high-value property face different tax burdens compared to those owning multiple lower-value properties, despite having the same total assessed value. Critics argue that the current system's reliance on the number of homes owned creates inequities in tax burdens.
During a public discussion on real estate tax reform held on July 16, the idea of transitioning the 종부세 assessment criteria from the number of homes to property value was proposed as a viable alternative. It was noted that owning one high-value property in the metropolitan area has become more tax advantageous than owning several lower-value properties in rural areas, which has fueled the preference for the 'one good house' strategy.
Academics generally agree on the need to strengthen property taxes while lowering transaction taxes such as acquisition and capital gains taxes. They argue that South Korea's tax burden on property ownership is relatively low compared to the high burden on transactions, indicating a need to balance these two aspects.
However, there are concerns that a sudden increase in tax burdens could delay the sale of properties by multiple homeowners or lead to higher rental prices as the increased tax costs are passed on to tenants. Therefore, experts suggest that any reforms should be implemented gradually to minimize market disruption.
Shifting the tax basis to property value could also change how market participants allocate their assets. While the disadvantages associated with the number of homes owned would decrease, a simplified tax system based on total property value could ease the tax burden for those owning multiple lower-value properties in rural areas. Conversely, if concentrating assets in a single high-value property becomes more advantageous, the preference for the 'one good house' strategy may be reinforced in a different form.
Experts agree that the key issue in this tax reform is not merely about increasing tax revenue but rather determining the criteria for taxation. The success of the proposed reforms will hinge on whether it can achieve both tax equity and market stability.
According to relevant authorities, the government plans to unveil a tax reform proposal that includes strengthening property taxes as early as the end of this month.
The current property tax system consists of local property taxes and the national comprehensive real estate tax (known as 종부세). The 종부세 applies different tax rates and deductions based on the number of homes owned. This has led to situations where individuals owning a single high-value property face different tax burdens compared to those owning multiple lower-value properties, despite having the same total assessed value. Critics argue that the current system's reliance on the number of homes owned creates inequities in tax burdens.
During a public discussion on real estate tax reform held on July 16, the idea of transitioning the 종부세 assessment criteria from the number of homes to property value was proposed as a viable alternative. It was noted that owning one high-value property in the metropolitan area has become more tax advantageous than owning several lower-value properties in rural areas, which has fueled the preference for the 'one good house' strategy.
Academics generally agree on the need to strengthen property taxes while lowering transaction taxes such as acquisition and capital gains taxes. They argue that South Korea's tax burden on property ownership is relatively low compared to the high burden on transactions, indicating a need to balance these two aspects.
However, there are concerns that a sudden increase in tax burdens could delay the sale of properties by multiple homeowners or lead to higher rental prices as the increased tax costs are passed on to tenants. Therefore, experts suggest that any reforms should be implemented gradually to minimize market disruption.
Shifting the tax basis to property value could also change how market participants allocate their assets. While the disadvantages associated with the number of homes owned would decrease, a simplified tax system based on total property value could ease the tax burden for those owning multiple lower-value properties in rural areas. Conversely, if concentrating assets in a single high-value property becomes more advantageous, the preference for the 'one good house' strategy may be reinforced in a different form.
Experts agree that the key issue in this tax reform is not merely about increasing tax revenue but rather determining the criteria for taxation. The success of the proposed reforms will hinge on whether it can achieve both tax equity and market stability.
* This article has been translated by AI.
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