Yeouido Research Institute "Publicly Announced Price Realization Rate Should Be Lowered from 90% to 80%"

[Asia Economy Reporter Lee Ji-eun] The conservative think tank Yeouido Institute criticized the government's policy to raise the official property price realization rate to 90%, stating that "the official price realization rate should be lowered to 80% and the period to reach the target should be extended."

Kim Chang-bae, Head of Economic Policy at Yeouido Institute, wrote in an issue brief titled "Problems of Official Price Realization and Policy Suggestions" published on the 12th that "If the government's policy is implemented as is, the tax burden on owners of mid-to-low priced houses valued between 600 million and 900 million KRW will relatively increase, and side effects such as simultaneous rises in various social insurance premiums and tax shifting through conversion from jeonse to monthly rent are expected."

Kim pointed out that "It ultimately means a tax increase even for single-homeowners with properties under 600 million KRW," adding, "Even if housing market prices do not rise, if the market price reflection rate increases by just 10 percentage points, property taxes for single-homeowners under 600 million KRW will increase compared to the current level." For example, for an apartment currently valued at 500 million KRW, the property tax decreases from 570,000 KRW to 420,000 KRW due to a 0.05 percentage point reduction in the property tax rate, but as the market price reflection rate rises to 79%, the property tax will increase again to over 570,000 KRW.

He especially noted that the tax burden on owners of mid-to-low priced houses valued between 600 million and 900 million KRW is expected to increase the most relatively. Kim explained, "Mid-to-low priced houses in the 600 million to 900 million KRW range, which are excluded from the property tax relief target (under 600 million KRW), have the lowest market price reflection rate, so the perceived tax burden due to uniform official price realization will be the highest."

Furthermore, since official property prices are used as a standard for more than 60 types of taxes and welfare administrative purposes?including property tax, comprehensive real estate holding tax, acquisition tax, capital gains tax, gift tax, health insurance premiums, basic pension, and development charges?the realization of official prices inevitably leads to simultaneous increases in various social insurance premiums and may cause confusion in the operation of welfare programs such as basic pensions and scholarships, he pointed out.

The Yeouido Institute proposed as an alternative lowering the official price realization rate from 90% to 80% and extending the period to reach the target from 5?15 years to 13?20 years. They also suggested that since the government’s unilateral determination of official land prices violates the principle of 'tax legality,' a procedure requiring parliamentary approval should be introduced.

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