South Korea Ranks First in Growth Rate of Property Holding Tax Relative to GDP

Increase in Comprehensive Real Estate Tax for Multi-Homeowners and Impact of Rising Official Property Prices

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Last year, the proportion of real estate holding tax to South Korea's gross domestic product (GDP) increased at the fastest rate among the Organization for Economic Cooperation and Development (OECD) countries.

According to OECD statistics on the 6th, last year, South Korea's real estate holding tax accounted for 0.94% of nominal GDP, up 0.11 percentage points from the previous year. This is the highest growth rate among OECD member countries.

This appears to be due to a significant increase in holding tax revenue as the comprehensive real estate tax burden on multi-homeowners increased and the publicly announced property prices rose last year.

However, compared to the speed at which the holding tax proportion is increasing, the absolute level ranked 14th out of 35 OECD countries, placing it in the middle tier. The proportion of holding tax to GDP is highest in Canada and the United Kingdom at around 3%, while the United States, France, and Japan are in the 1-2% range.

Nevertheless, South Korea's ranking has been rising from 22nd in 2016, 21st in 2017, 17th in 2018, to 14th last year.

South Korea's holding tax proportion is also expected to rise sharply this year and next. According to the July 10 measures and subsequent legislation by the National Assembly, the comprehensive real estate tax rate will increase from 0.5?3.2% this year to 0.6?6.0% next year. The realization of publicly announced prices is also a factor that can push up the holding tax proportion.

The proportion of real estate transaction tax to GDP is estimated to be the largest among major countries. Last year, South Korea's property (real estate and securities) transaction tax proportion to GDP decreased by 0.14 percentage points to 1.76%.

Since countries other than South Korea and the United Kingdom do not impose securities transaction tax, it is difficult to directly compare this figure horizontally.

However, considering that out of the 33.65 trillion won in property transaction tax last year, 29.18 trillion won was real estate transaction tax, South Korea's real estate transaction tax proportion to GDP last year is estimated to be around 1.5%.

When comparing the tax revenue proportion excluding securities (1.5%) to foreign property transaction tax proportions, South Korea's figure ranks first among OECD member countries, ahead of Belgium (1.14%) and Italy (1.05%).

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