[Initial View] The Shameful Tax Republic

[Asia Economy Reporter Kwangho Lee] The 'Comprehensive Real Estate Holding Tax (종합부동산세, 종부세)' is a hot topic in the real estate market. Taxes directly related to livelihood are sensitive issues for the working and middle classes, and this year, the tax burden has increased due to a significant rise in housing prices and an increase in the official price market reflection rate.

The 종부세 was promoted in September 2003, when the late President Roh Moo-hyun took office and the Participatory Government was launched. Simply put, it was intended to impose 'punitive taxation' on people living in high-priced homes, viewing them as 'potential speculators.'

However, contrary to the original intention, controversy has grown as the number of taxpayers exceeded 740,000 this year. It is expected that almost all of Seoul will be subject to 종부세 next year, leading to strong criticism about whether the current 종부세 taxation system is appropriate.

Of course, opinions are divided between those who oppose it, saying "Is this a fine or a tax?" and those who accept it, saying "Since housing prices have risen, it is right to pay more." Complaints pour in mainly from real estate communities, such as "The government raised housing prices and now asks citizens to pay taxes," and "Retired people have limited income and inevitably feel burdened by taxes; does this mean people without money should not even own one house?"

However, the government maintains that only 1.3% of the entire population is subject to 종부세, and that actual owners of one house bear a relatively small burden. In other words, it is right to pay more because housing prices have risen. The government also emphasizes that one-house owners can receive tax credits of up to 70% if they hold the house long-term or are elderly. Next year, this reduction is expected to increase to up to 80%.

Experts point out that it is time to reconsider the 종부세 taxation system. While housing market prices have risen, the current taxation criteria remain at the level of 13 years ago (December 2008, when the Comprehensive Real Estate Holding Tax Act was amended). According to KB Real Estate Statistics, the median sale price of apartments in Seoul when 종부세 was introduced in 2009 was 502.03 million KRW. Since then, Seoul housing prices have steadily increased, reaching a median sale price of 920.93 million KRW as of last month. 종부세 reflects market prices. As housing prices rise, more properties become subject to 종부세, and taxpayers inevitably pay more taxes.

The structure where taxes increase without realizing gains from the rise in housing prices is problematic. Ultimately, disposable income decreases, which can lead to reduced consumption. For this reason, Jin-ae Kim, a member of the Open Democratic Party, submitted a related amendment bill to the National Assembly, proposing that taxpayers who are one-house owners aged 65 or older, with a taxable standard below 600 million KRW, and who meet certain income and actual residence period requirements, be allowed to defer payment of 종부세 when selling, inheriting, or gifting their house.

There are also claims that the current 종부세 has many problems compared to taxes in advanced countries such as the United States. However, the government argues that 'the domestic real estate tax burden is lower compared to overseas.' According to the Organisation for Economic Co-operation and Development (OECD), last year, Korea's property tax (property tax + 종부세) ratio to GDP was 0.87%. This is lower than advanced countries such as Canada (3.13%), the United Kingdom (3.09%), and the United States (2.69%), as well as the OECD 33-country average (1.06%), according to the government.

Experts say that comparing property tax burdens solely by simple figures is often misleading. In the U.S. tax system, property tax includes only property tax, which varies greatly not only by state but also by dozens of counties. Additionally, income deduction benefits reduce the actual burden. For example, when purchasing a house through a mortgage loan, interest income deductions are provided.

Although the government has announced its 24th real estate measure, public expectations for housing price increases are at an all-time high. It is not an exaggeration to call it a 'policy failure.' 종부세 is a punitive tax. Rather than focusing solely on the phenomenon of rising housing prices and raising taxes, the government should analyze it from the perspective of citizens' lives and reflect that in its measures. Fundamental course correction is necessary.

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