The Democratic Party and the government to negotiate in August on 'Top 2% Comprehensive Real Estate Tax'... Key issues include rounding calculation method in units of 100 million won

Discussion on Amendment Bill at Tax Subcommittee Early Next Month
Key Issues Include Rounding Below 100 Million Won and Changes to Deduction Periods

[Asia Economy Reporter Jang Sehee] The Democratic Party of Korea has decided to pass a comprehensive real estate tax (종합부동산세, 종부세) bill at the August extraordinary session of the National Assembly, which sets the tax base at the top 2%. Key issues are expected to include the rounding method for amounts under 100 million won and the impact of publicly announced prices of houses owned by others.

According to ruling and opposition parties on the 20th, the National Assembly's Planning and Finance Committee will hold a tax subcommittee meeting in early next month to discuss the amendment to the comprehensive real estate tax bill, which was introduced by Representative Yoo Dong-soo of the Democratic Party. This plan is based on the premise that an agreement on the second supplementary budget (추경) must be reached first. Negotiations between the opposition party and the Ministry of Economy and Finance, which manages the budget, are prioritized. A key Democratic Party official said, "Since the passage of the supplementary budget in the National Assembly is urgent, we will first handle the supplementary budget and then discuss the comprehensive real estate tax amendment bill introduced by Representative Yoo in early August if it is resolved," adding, "The National Tax Service plans to send out tax notices by the end of November and collect payments in December, so the sooner, the better."

The main issues are expected to be the rounding of publicly announced prices under 100 million won, whether to include properties based on surrounding conditions, and the frequency of deduction amount changes. The most controversial issue is expected to be the rounding of units under 100 million won. According to Representative Yoo's proposal, if the original top 2% threshold is 1.14 billion won, rounding would set the tax base at 1.1 billion won. In this case, single-homeowners with properties valued between 1.1 billion and 1.13 billion won, who are not in the top 2%, would also have to pay the comprehensive real estate tax. Some argue that modifying the threshold to units under 10 million won rather than close to 100 million won would better align with the policy intent.

However, the opposition party insists that the tax base should be set by an absolute amount, not by relative proportion (top 2%). Representative Yoon Hee-sook of the People Power Party, a member of the Planning and Finance Committee, stated in an interview, "The tax one pays should be determined based on one's economic capacity," emphasizing, "The comprehensive real estate tax base should be set by an absolute amount." In practice, if rounding down is applied, taxation could occur even if one is below the top 2%, and if rounding up is applied, taxation might not occur even if one exceeds the top 2%.

Another issue raised is the potential influence of publicly announced prices of houses owned by others. Jeong Yeon-ho, senior expert of the National Assembly Planning and Finance Committee, pointed out in the review report, "If the deduction amount is set based on relative proportions, the publicly announced prices of houses owned by others affect whether taxation applies and the calculation of deduction amounts," adding, "This undermines predictability and may reduce taxpayer compliance." For example, if a large apartment complex A currently valued at 1.2 billion won is reconstructed into apartment B valued at 1.5 billion won, the top 2% threshold would decrease during the reconstruction period. This means that apartments in other regions could fall within the top 2% during this period.

The frequency of deduction amount changes is also a point of contention. According to the tax subcommittee's review materials, changing deduction amounts every three years could be disadvantageous to taxpayers compared to annual changes. Jeong noted, "If publicly announced prices rise within 10% annually and deduction amounts remain unchanged for three years, owners of properties in the top 3-4% could also be subject to the comprehensive real estate tax."

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