A Bill to Raise the Comprehensive Real Estate Holding Tax and Capital Gains Tax for Chaebols Also Proposed

Lee Hae-chan, leader of the Democratic Party of Korea, is attending the Supreme Council meeting held at the National Assembly on the 8th and delivering opening remarks. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Park Cheol-eung] A bill has been introduced to raise the comprehensive real estate holding tax (종부세) and capital gains tax rates on non-business-use land held by conglomerates. The purpose is to prevent profits from being concentrated on real estate speculation rather than productive investment or wage increases.

Kim Jeong-ho, a member of the Democratic Party of Korea, has proposed amendments to the Comprehensive Real Estate Holding Tax Act and the Corporate Tax Act reflecting this content. Currently, a uniform tax rate of 3% is applied to non-business-use land and other comprehensive aggregated taxation targets exceeding 4.5 billion KRW, but the amendment aims to raise the rate to 4% for 10 billion to 20 billion KRW and 5% for amounts exceeding 20 billion KRW. This follows the 2018 tax law revision that raised the highest tax rate on comprehensive aggregated land from 2% to 3%, now seeking to increase it further to 5%.

Kim stated, "The excessive land holdings by conglomerate companies and the concentration of land ownership have emerged as social issues," adding, "This is because the holding tax on real estate has not been sufficiently realized to prevent speculation and alleviate ownership concentration," explaining the background of the proposal.

According to a report released last year by the Economic Justice Practice Federation, the total publicly announced land value held by the top 10 companies based on the 2017 National Tax Service data was 385 trillion KRW, about 3.8 times higher than the 102 trillion KRW in 2007. Kim also pointed out, "According to the 2016 land ownership statistics, 0.97% of the population in South Korea owns more than half, 54.1%, of privately owned land."

The amendment to the Corporate Tax Act proposes raising the additional capital gains tax on non-business-use real estate from 10% to 30% for business groups subject to mutual shareholding restrictions with total assets exceeding 10 trillion KRW. Under current law, when a corporation transfers non-business-use land, 10% of the capital gains tax on the land is added to the general corporate tax amount and taxed accordingly.

Kim argued, "Large corporations, as of 2018, have retained 1,400 trillion KRW in internal reserves but have not used these funds for strengthening industrial competitiveness or for wage increases to promote virtuous cycles in household economies, instead focusing solely on real estate speculation. This has caused real estate prices to skyrocket and, consequently, household financial soundness to deteriorate, creating a vicious cycle." He cited that business groups subject to mutual shareholding restrictions have relatively abundant liquid funds and higher socio-economic responsibilities.

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