Real Estate Transaction Taxes Relative to GDP in Korea Rank First Among 8 Major Countries

2.5 Times the Average of 8 Countries, 4.5 Times the Average of 37 OECD Countries

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[Sejong=Asia Economy Reporter Kim Hyunjung] It has been revealed that the proportion of real estate transaction tax revenue, including acquisition tax, to South Korea's gross domestic product (GDP) is the highest among the eight major OECD countries. Meanwhile, property holding tax was analyzed to be the second lowest among the eight countries.

On the 28th, the Korea Institute of Public Finance published the April issue of 'Fiscal Forum' and released a report titled 'Comparison of Real Estate-Related Tax Burdens in Major Countries' containing these findings. Kwon Seong-oh, a senior researcher at the Korea Institute of Public Finance and the author of the report, compared the real estate-related tax burdens of eight countries?South Korea, the United States, the United Kingdom, France, Germany, Japan, Canada, and Australia?based on the OECD tax database. According to the analysis, South Korea's transaction tax revenue as a percentage of GDP was 1.8% in 2019.

This is 2.5 times the average of the eight major countries (0.7%) and 4.5 times the average of all 37 OECD countries (0.4%). It also shows a significant gap compared to Australia (1.1%), ranked second, and France (0.8%), ranked third. Some countries apply lower tax rates, such as the United States (0.1%) and Japan and Canada (each 0.3%).

The institute explained that South Korea's acquisition tax rate for single-homeowners ranges from 1% to 3% depending on the acquisition price, which is lower than Japan's standard rate of 4% and Germany's rate of over 3.5% depending on the region. However, differences arise in areas such as applying rates of 8% and 12% for multiple homeowners.

In South Korea, frequent housing transactions also contribute to increasing tax revenue. As of 2017, South Korea's housing turnover rate was 5.5%, higher than the United States at 4.5%, the United Kingdom at 3.6%, and France at 2.7%.

High real estate prices can also increase the burden of acquisition tax. South Korea's total real estate value relative to GDP is 5.3 times, the highest among the eight countries compared. The average among the eight countries is 4.1 times. Regarding capital gains tax, one of the major transaction taxes, differences in the scope of taxation, tax rates, asset price levels, and rate of change led to its exclusion from the comparison.

Regarding property holding tax, South Korea is lower compared to major countries. In 2018, South Korea's property holding tax revenue as a percentage of GDP was 0.85%, only 39% of the eight-country average (2.17%). The effective property holding tax rate, which represents the property holding tax amount relative to total real estate assets, was 0.16% in South Korea in 2018, less than one-third of the eight-country average of 0.53%.

However, South Korea's effective property holding tax rate has been rising by 0.01 percentage points annually: 0.15% in 2017, 0.16% in 2018, and 0.17% in 2019. Senior researcher Kwon said, "Compared to major countries, South Korea has a low effective property holding tax rate and a high total real estate value relative to GDP. Transaction taxes are higher than in foreign countries, which appears to be largely influenced by relatively high transaction frequency and real estate prices."

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