Even National Research Institutes Say "Unprecedented"... The '2% Comprehensive Real Estate Tax Proposal' Only Fuels Confusion

Josayeon Survey Finds No Cases of Property or Wealth Taxation Based on Percentage in Major Countries
Ruling Party Also Confused Over Specific Criteria for Valuation Price
Predictability and Clarity Are Lacking
"Political Judgment Over Market Stability" Criticism Arises

[Sejong=Asia Economy Reporter Kim Hyunjung] The Democratic Party of Korea is facing backlash from the market ahead of the passage of a related law amendment that imposes a comprehensive real estate tax on the top 2% of houses based on official prices. A survey by a government-funded research institute confirmed that there has been no precedent worldwide for imposing holding or wealth taxes based on a percentage, and there are criticisms that confusion is being fueled as the party itself has yet to reach a conclusion on specific calculation criteria.

According to materials requested by the Tax Subcommittee of the National Assembly's Planning and Finance Committee and disclosed by People Power Party lawmaker Choo Kyung-ho on the 14th, regarding the Democratic Party's party-line decision to impose the comprehensive real estate tax on the top 2%, the Korea Institute of Public Finance stated, "As a result of investigating overseas cases, no instances were found where holding or wealth tax systems are operated linked to a percentage." The countries surveyed include major nations such as the United States, France, Japan, Germany, Norway, and Spain.

The Democratic Party's proposed reform of the comprehensive real estate tax sets the deduction amount for single-homeowners at the housing price corresponding to the top 2% based on official prices. The specific amount is delegated to enforcement ordinances, and the law provides delegation criteria to determine that amount considering the housing prices of the top 2% based on official prices. Similarly, some laws provide delegation grounds and specify the exact amounts in enforcement ordinances, such as the basic deduction for financial investment income (Income Tax Act), the scope of major shareholders subject to capital gains tax on stock transfers (Income Tax Act), and national tax refund surcharge (National Tax Basic Act). However, defining the amount criterion itself as a ‘percentage’ is unique to the comprehensive real estate tax law amendment currently being attempted.

Controversy continues over the valuation price standard used to determine the ‘2%’ for actual taxation. On the 7th, the Democratic Party proposed as party policy a bill to apply rounding when calculating the valuation price, cutting off at the ‘hundred million won’ unit. When opposition parties such as People Power Party pointed out that rounding by ‘round half up’ could reduce predictability and clarity, some ruling party members suggested adjusting the ‘hundred million won’ unit to ‘less than ten million won’ units.

The Ministry of Land, Infrastructure and Transport calculated this year’s official price for the top 2% of houses at about 1.068 billion won. By percentile, 1% is 1.445 billion won, 3% is 915 million won, 5% is 718 million won, and 10% is 506 million won. If the rounding rule below the ‘hundred million won’ unit is applied, the comprehensive real estate tax threshold will be 1.1 billion won, making about 94,000 people liable for the tax. Conversely, if the rounding rule below the ‘ten million won’ unit is applied, the threshold lowers to 1.07 billion won, increasing the number of taxpayers to about 110,000.

Experts also voice concerns about introducing a percentage-linked taxation criterion for the comprehensive real estate tax. Professor Shim Gyo-eon of Konkuk University’s Department of Real Estate said, "The direction of the comprehensive real estate tax reform should align with the government’s original goals of market stability and fairness," adding, "If a related tax system with a weak basis for existence is pushed through based on conviction and political purposes, it will ultimately be difficult for ordinary citizens’ lives to improve."

The Democratic Party plans to attempt to pass the top 2% comprehensive real estate tax bill at the National Assembly Tax Subcommittee meeting held that day.

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