[Exclusive] National Assembly Budget Office: "The Perception That Property Tax Is Lower Than OECD Is an Illusion"

"Burden Increase Rate Much Faster"
Focus on Report Refuting Government Logic
Transaction Tax Highest Among OECD Countries

A report from the National Assembly Budget Office revealed that the pace of increase in property tax burdens, including property tax and comprehensive real estate holding tax, in South Korea over the past four years has been much faster than that of OECD member countries. This challenges the logic used by the current government to justify strengthening tax burdens for stabilizing the real estate market, which argued that the tax burden relative to real estate prices was lower than the OECD average.

In the report titled "Analysis and Evaluation of the Status of South Korea's Real Estate-Related Tax Burden through International Comparison," published in Volume 10, Issue 4 of the academic journal "Budget Policy Research" on the 30th, Joo Mansu, a professor in the Department of Economics at Hanyang University and the author of the report, stated, "Despite South Korea's high level of real estate tax burden, the tax system was strengthened based on the mistaken perception that the burden was low."

According to the report, South Korea's property holding tax as a percentage of GDP was 0.52% in 2000, lower than the OECD average of 0.86%, but equal to the median. However, it rapidly increased to 0.93% in 2019, approaching the OECD average of 1.06% and exceeding the median of 0.79%.

The share of holding taxes in total tax revenue also rose sharply. The proportion, which was 2.48% in 2000, surged to 3.39% in 2019, ranking 14th among 37 OECD countries. Notably, from 2015 to 2019, South Korea's share increased by 0.22 percentage points, while the median and average of OECD countries actually decreased, highlighting a contrast.

Moreover, in terms of transaction taxes, South Korea recorded the highest share relative to GDP and total tax revenue among the 37 OECD countries. In 2019, excluding South Korea, the maximum GDP share and total tax revenue share of real estate transaction taxes among OECD countries were 1.14% and 3.92%, respectively. In contrast, South Korea's shares were 1.76% and 6.42%, the highest levels among OECD countries.

The report also pointed out logical issues with the government's rationale for punitive tax burden increases on high-value property owners and multiple homeowners. Unlike OECD countries that tax real estate holding taxes at proportional rates, South Korea taxes a significant portion under a progressive tax rate system.

Professor Joo expressed concern, saying, "If proper logic is established and there is confidence in policy effects, both higher tax rates and stronger progressive systems are possible. However, using international comparisons for this purpose may temporarily mislead the public but is a very unscientific and unvaluable way of thinking."

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