"Real Estate Capital Gains Tax Increase, Limited Price Stabilization Effect... Balance with Financial Investment Income Taxation"

The view of Seoul apartments from the 63 Building observatory on November 3rd last year. Photo by Hyunmin Kim kimhyun81@

[Sejong=Asia Economy Reporter Moon Chaeseok] There has been a claim that the taxation standards for capital gains arising from real estate should be applied consistently with other assets such as stocks. It is analyzed that heavy taxation on capital gains will not significantly contribute to stabilizing real estate prices by reducing the volume of sales.

Professor Oh Yoon of Hanyang University Law School stated this on the 31st in the lead column of the March issue of the Korea Institute of Public Finance's Fiscal Forum, titled "Suggestions for Expanding the Tax Base on Capital Gains."

Professor Oh explained, "In Korea, stocks are either non-taxed or taxed at low rates, but real estate is subject to a system of heavy taxation at high rates."

Column titled "Suggestions for Expanding the Tax Base on Capital Gains" written by Professor Oh Yoon of Hanyang University Law School. This column was published as the lead column in the March issue of the Korea Institute of Public Finance Forum on the 31st. (Source: Korea Institute of Public Finance)

Professor Oh argued that a consistent taxation system should be established between assets such as real estate and stocks. He pointed out, "While heavy taxation on capital gains can be expected to suppress speculative demand to some extent, it causes a freezing effect that reduces the volume of market sales, making it difficult to expect a significant price stabilization effect."

He advised, "It would be desirable to consistently strengthen real estate holding taxation while balancing the taxation on capital gains with that on financial investment income or rental business income."

He added, "From 2023, allowing an exemption of 50 million KRW per person on financial investment income and applying a 20% tax rate contrasts with the taxation of interest and dividend income, which applies a 14% tax rate without any exemption."

He also argued, "Interest and dividend income should be integrated into financial investment income and taxed at a single rate, whether 14% or 20%. It is desirable to allow the calculation of income amounts to consolidate capital gains with interest and dividend income."

Considering the current era where asset price inflation is deepening economic disparities between classes, Professor Oh suggested, "It is necessary to revise tax laws so that capital gains are fully taxed without exception."

He emphasized, "Since capital gains, one type of capital income, have characteristics distinct from labor income, a consistent taxation system should be established among assets subject to capital gains taxation."

Furthermore, he stated, "To expand the tax base, it is necessary to improve the system to allow capital gains taxation on gratuitously transferred assets, which have been excluded so far."

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