This year's National Assembly's Finance and Economy Committee audit is expected to focus on the reform of real estate taxation, the equity of tax collection and administration, and the predictability of policies. Key issues include the differences in tax burdens based on the number of homes owned and residency status, the criteria for taxing rental income, and the effectiveness of delinquency management by the government.
According to relevant departments on the 28th, the National Assembly's Finance and Economy Committee plans to conduct audits on the Ministry of Finance on October 6 and the Ministry of Planning and Budget on October 8.
Current housing-related taxes are categorized into acquisition tax at the purchase stage, property tax and comprehensive real estate tax at the holding stage, and capital gains tax at the transfer stage. Owners of multiple properties are subject to higher rates of acquisition tax, comprehensive real estate tax, and capital gains tax based on the number and location of their properties.
The government decided to revise the real estate taxation system through a tax reform plan announced in August. The capital gains tax will shift to a residency-based long-term holding special deduction, with new deduction limits being established. The comprehensive real estate tax reform plan includes a gradual transition of the tax rate system based on the value of the property rather than the number of homes owned, along with adjustments to the tax rate and the fair market value ratio.
Tax benefits for one-household, one-home owners will also change based on residency status. Starting in 2027, the basic deduction for comprehensive real estate tax for residents will increase to 140 million won, while for non-residents, it will decrease to 90 million won. The tax credit based on the holding period will also gradually shift to a residency-based standard.
The audit is expected to spark debate over whether residency-based taxation adequately reflects the diverse circumstances of taxpayers. Issues such as the tax burden for those who own jointly titled homes through inheritance or gifts while residing in different properties will be scrutinized. Discussions will also address how exceptions for non-residents due to employment, medical treatment, or family circumstances will be recognized.
Consistency in policies regarding the higher capital gains tax for multiple homeowners will also be a focus of scrutiny. The National Assembly's Legislative Research Service has pointed out in a report that the higher tax rates for multiple homeowners may delay property sales and lead to adverse effects such as a preference for owning a single high-value property or increased gifting of properties. Questions are expected regarding the temporary easing of the higher tax rate's impact on transactions and property supply, as well as its consistency with long-term taxation direction.
The equity of taxation on rental income from housing is also anticipated to be a contentious issue. The taxation criteria for monthly rent and jeonse (a Korean rental system) vary based on the number of properties owned, property value, and deposit size. The rationality of the tax burden differences based on rental methods and the taxation disparity between residential and commercial rental income will also be examined.
During the National Tax Service audit, the effectiveness of the large-scale delinquency management team is expected to be a major topic. The National Tax Service is operating a delinquency management team across 133 tax offices nationwide to assess the status of approximately 1.34 million national tax delinquents and about 4.24 million delinquents of non-tax revenue this year. The total amount subject to delinquency management, including non-tax revenue, is approximately 130 trillion won.
Given the significant investment in personnel and budget, the cost-effectiveness of the program will be a key focus. According to the National Tax Service, the 500-member national tax delinquency management team, which operated on a trial basis from March to early June, collected 15.12 billion won, approximately 2.85 times the budget of 5.3 billion won.
When evaluating collection performance, it is essential to consider the costs of labor and operations alongside the results achieved compared to previous collection activities. The accuracy of distinguishing between willful delinquents who have the ability to pay and those who are in financial distress, as well as whether connections to welfare or the expiration of tax obligations have effectively led to support for recovery, will also be subjects of verification.
* This article has been translated by AI.
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