'Hot Potato' Comprehensive Real Estate Tax Likely to Be Passed to the 21st National Assembly

Future United Party Expresses Opposition to Strengthening Comprehensive Real Estate Tax
Opposition Expected as Strengthened Tax Overlaps with Disaster Relief Cutoff Recipients

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] The Moon Jae-in administration's plan to strengthen the comprehensive real estate tax, declared as a war against real estate, is expected to be passed on to the 21st National Assembly for discussion. Public opinion has formed that it is inappropriate to push forward with the original plan announced before the COVID-19 pandemic, and the main opposition party, the United Future Party, continues to oppose it. Additionally, since the recipients excluded from the emergency disaster relief fund (top 30% income earners and high-value asset holders) are expected to partially overlap with those subject to the strengthened comprehensive real estate tax, market psychological resistance is also anticipated to be strong.

According to the National Assembly on the 21st, Kim Jung-woo, a member of the ruling Democratic Party and ranking member of the Planning and Finance Committee, Chu Kyung-ho of the United Future Party, and Yoo Sung-yeop of the Minsheng Party are scheduled to discuss the committee's agenda and bill review on the same day. The Democratic Party plans to pass the amendment to the Comprehensive Real Estate Tax Act, which includes the December 16 real estate measures announced last year, during the plenary session of the April National Assembly alongside the second supplementary budget bill for COVID-19 response. The amendment, proposed by Representative Kim based on the government’s plan, aims to raise the comprehensive real estate tax rate by 0.1 to 0.3 percentage points for single-homeowners and owners of two homes outside regulated areas, and by 0.2 to 0.8 percentage points for owners of three or more homes and owners of two homes in regulated areas. The tax burden cap for owners of two homes in regulated areas will be raised from the existing 200% to 300%.

If the amendment to the Comprehensive Real Estate Tax Act fails to pass at the tax subcommittee meeting scheduled this month, the bill will be automatically discarded with the end of the 20th National Assembly. Considering the tax base date for the comprehensive real estate tax, the amendment must be passed in the April National Assembly to be applied to this year’s tax payments. The comprehensive real estate tax is levied based on June 1, so the bill must be passed by May. If the discussion is postponed, the amendment will only apply to the 2021 tax payments billed in December next year. In the 21st National Assembly, the bill will have to go through the legislative process again from the beginning.

However, the opposition party has expressed firm opposition. Representative Chu said, "Given the poor economic situation due to the COVID-19 crisis, it is not appropriate to impose policies that squeeze the people with taxes while pouring massive fiscal resources," adding, "We need to consider how to revive the market and reduce burdens." The United Future Party has even proposed a related amendment that lowers the tax burden cap for single-homeowners from 150% to 130% and expands deductions for seniors aged 60 and over and long-term holders, contrary to the ruling party’s amendment.

Separately, there is also an assessment that it has become more difficult to push forward as the ruling party made statements during the general election campaign raising expectations for easing the comprehensive real estate tax. Democratic Party co-chairman Lee Nak-yeon and floor leader Lee In-young stated during their campaign in the Gangnam 3 districts that "the comprehensive real estate tax for long-term residents with one household and one home will be eased."

Experts foresee that pushing for the strengthening of the comprehensive real estate tax at this point could unsettle the market. Professor Kwon Dae-jung of Myongji University’s Department of Real Estate said, "If the comprehensive real estate tax is raised in a difficult economic situation, owners may raise rents or reverse their intention to lower them," adding, "As a result, the burden could be passed on to ordinary citizens." Professor Kwon also argued, "Since the top 30% income earners and asset holders excluded from the emergency disaster relief fund will ultimately be subject to the increased comprehensive real estate tax, psychological resistance will be strong," and insisted, "The discussion itself should be postponed to the 21st National Assembly."

This content was produced with the assistance of AI translation services.