"'Jongbuse' = Symbol of Wealth? ... Number of People Receiving Tax Notices Has Significantly Increased"

Reviewing the Notification Status of Comprehensive Real Estate Tax Base by Tax Bracket for Residential Properties

[Sejong=Asia Economy Reporters Kim Hyunjung, Jang Sehee] Last year, among those subject to the comprehensive real estate holding tax (종부세) notified by the National Tax Service, the number of taxpayers in the lowest tax base bracket (3 billion KRW or less) increased significantly. A sharp rise was observed even in areas where housing prices were relatively low, resulting in many being included as 종부세 taxpayers. There are concerns that the original purpose of introducing 종부세?to increase the tax burden on owners of ultra-high-priced homes and curb excessive real estate holdings?is gradually fading.

According to the "2019-2020 Housing Comprehensive Real Estate Holding Tax Tax Base Bracket Notification Status" submitted by the National Tax Service to the National Assembly on the 7th, the number of people notified for 종부세 last year was 667,000, an increase of 147,000 (28.3%) compared to the previous year. Among them, taxpayers in the tax base bracket of 3 billion KRW or less increased by 59,000 to 412,000 during the same period. The government had previously established the tax base bracket of 3 billion KRW or less starting from the 2019 notifications through a 2018 tax law amendment as part of real estate price stabilization measures. The scale of increase in taxpayers within this bracket was first confirmed in last year's notification, the second year since its establishment.

Line Up at the 종부세 ‘Entrance’... 16.7% Increase in the 3 Billion KRW or Less Bracket

종부세 is calculated by multiplying the tax base, which is the official housing price minus the tax exemption threshold (6 billion KRW for general cases, 9 billion KRW for single household single home), by the fair market value ratio and the tax rate. Considering this, the tax base bracket of 3 billion KRW or less corresponds to homes with an official price of about 1.2 billion KRW.

The increase in 종부세 taxpayers in the 3 billion KRW or less bracket reflects the short-term surge in housing prices. The tax amount notified in this bracket increased by 22 billion KRW (16.3%) from 134.6 billion KRW in 2019, the first year of establishment, to 156.6 billion KRW last year due to recent real estate price increases. Compared to higher brackets?6 billion KRW or less (22.7%), 12 billion KRW or less (56.3%), 50 billion KRW or less (80.5%), 94 billion KRW or less (48.5%), and over 94 billion KRW (24.2%)?the growth rate is relatively low, but if the current price rise trend continues, it is highly likely that more 종부세 taxpayers will fall into the 3 billion KRW or less bracket.

Seo Jin-hyung, president of the Korea Real Estate Society and professor at Gyeongin Women's University, said, "The rapid increase in taxpayers is problematic not only due to rising real estate prices but also because of the realization of official land prices and the increase in the fair market value ratio," adding, "It is impossible to stabilize the market through taxes alone, and the tax exemption range needs to be expanded."

Geumcheon, Gangbuk, Dobong Districts... The Era of Non-Popularity is Over, Rapid Increase in 종부세 Payers in Outlying Areas

The expansion of the 3 billion KRW or less tax base bracket is also evident in the sharp increase in taxpayers and tax amounts in working-class residential areas such as Geumcheon, Gangbuk, and Dobong districts in Seoul, which had been 종부세 ‘no-effect zones’. According to the 2019 종부세 decision tax amount status by district in Seoul, the number of taxpayers was 295,362, and the tax amount was 619.364 billion KRW, representing a 60.1% and 161.7% increase respectively compared to 2017. Although Gangnam, Seocho, Songpa, and Yongsan districts accounted for nearly 70% of the total in terms of both taxpayers and tax amounts, the increase rates in Geumcheon, Gangbuk, and Dobong districts were remarkable. The number of 종부세 payers in Geumcheon, which was only 860 in 2017, rose to 1,454 in 2019. The tax amount they paid also increased from 546 million KRW to 1.572 billion KRW. Over two years, this represents a 69.1% increase in taxpayers and a 187.9% increase in tax amount.

In 2019, Gangbuk district had 1,608 종부세 taxpayers and a tax amount of 2.57 billion KRW, increasing by 44.2% and 243.4% respectively over two years. Dobong district had 2,134 taxpayers and 1.964 billion KRW in tax amount in 2019, up 46.4% and 142.8% respectively.

Regarding this, Shim Gyo-eon, professor of real estate at Konkuk University, explained, "As a balloon effect of strengthened real estate policies, demand has concentrated not only on apartments but also on other housing types (multi-family, row houses) and some areas within Seoul that had been excluded from price increases," adding, "With the recent rapid rise in asset prices, areas and brackets that had not moved before are now moving together, so the amount of 종부세 collected in the future will increase further."

Seo Jin-hyung, president of the Korea Real Estate Society and professor at Gyeongin Women's University, emphasized again, "The rapid increase in taxpayers is problematic not only due to rising real estate prices but also because of the realization of official land prices and the increase in the fair market value ratio," adding, "It is impossible to stabilize the market through taxes alone, and the tax exemption range needs to be expanded."

[Image source=Yonhap News]

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