Property Tax Exceptions Again and Again... Patchwork Tax System, Collapsed Tax Principles

Expert: "Benefits Only for Single-Homeowners Violate Fairness... Possible Unconstitutionality"
Sejong and Other Areas with Falling Official Prices Are 'Exceptions to Exceptions'... Few Ultra-High-Value Homes, So No Real Effect
Next Year's Property Tax Calculation Also Unpredictable... Urgent Need to Restore Broken Tax Principles

[Asia Economy Sejong=Reporters Kwon Haeyoung and Kim Minyoung] The government’s excessive issuance of 'tax special cases,' such as freezing the property tax for single-home households at last year’s level, has drawn increasing criticism for completely undermining tax principles like fairness with multi-homeowners and policy predictability. Taxpayers are now in a blind spot, unable to know which year’s official property price will apply next year due to the repeated application of property tax exemption rules like in Sejong and the one-year temporary freeze on property tax. Since the new administration took office, there are urgent calls for a comprehensive reform of the property tax system and the establishment of broken tax principles such as fairness and consistency.

◆ Numerous exceptions for single-homeowners, exclusion of tax benefits for multi-homeowners ＝According to tax experts on the 24th, giving preferential treatment only to single-home households, as in the current policy, violates the principle of tax fairness and even raises concerns about constitutionality. For example, even if living in the same apartment complex, single-homeowners are taxed based on last year’s official property price, while multi-homeowners are taxed based on this year’s official price. Applying different tax rates on the same property depending on the number of homes owned by the taxpayer contradicts the principle of tax fairness. This is why constitutional review lawsuits could arise even if the Restriction of Special Taxation Act (Joteukbeop) is amended. Professor Hong Kiyong of Incheon National University’s Department of Business Administration pointed out, “The government’s limitation of property tax relief only to single-home households is another form of preferential treatment. The Constitutional Court ruled in 2008 that the combined taxation of comprehensive real estate tax by household was unconstitutional, so giving benefits only to single-home households while excluding multi-homeowners from benefits is also unconstitutional in another sense.”

Criticism also arises that the government’s establishment of irregular tax principles?applying different prices only in certain years and different tax systems depending on the number of homes?has seriously undermined tax consistency and predictability. Moreover, in places like Sejong City, where official property prices have fallen compared to the previous year, the government has created an exception to the exception by taxing based on the current year’s official price again, effectively reversing the exemption rule once more. There is criticism that the government has passed the burden of restoring the tax principles it has itself broken to the next administration when it comes to future real estate tax reforms.

In cases like Sejong, where official prices have dropped, the government maintained the exception to apply this year’s official price, but there are also criticisms that this has no practical effect. A real estate industry official said, “In Sejong, there are few apartments with official prices above 1.1 billion KRW, which is the threshold for comprehensive real estate tax. The exceptional policy, which damages tax principles, will only cause market confusion without any real beneficiaries.”

◆ Real estate tax next year also unpredictable ＝The government’s patchwork temporary freeze on property tax to ease the burden on single-homeowners ahead of elections has made it impossible to know which year’s official property price will apply when calculating next year’s property tax. Tax policy should be consistent and predictable, but taxpayers have lost even the basic ability to predict.

In particular, because the government implemented this year’s temporary freeze on official prices without relaxing the tax burden cap, there are growing concerns that when paying property tax next year, the increase in official prices over two years will be reflected all at once, potentially increasing taxes. Until the new administration comes up with comprehensive measures, taxpayers’ confusion is expected to continue.

The government is expected to introduce a new package to ease property taxes, including property tax, after this patchwork measure. Earlier, President-elect Yoon Seokyeol promised during his candidacy a major reduction in property tax burdens. Key proposals include ▲ lowering the fair market value ratio to ease official prices to 2020 levels ▲ restoring the comprehensive real estate tax rate for single-homeowners to the level at the start of the current administration ▲ reestablishing the roadmap for official price realization rates. Unlike the government’s single-homeowner-centered property tax relief measures, Yoon’s pledges include multi-homeowners as well.

Experts point out that discriminatory policies against multi-homeowners should also be abolished to uphold the principle of tax fairness. Overseas, there is no discrimination based on the number of homes owned. For example, in the case of capital gains tax, while Korea imposes heavier taxes depending on the number of homes, among the 40 OECD countries (37 members and candidate countries), 26 countries (65%) do not tax capital gains on primary residences.

Professor Hong said, “Even if tax policies are changed, the implementation should be set five years later so that taxpayers can predict and prepare. It is urgent to establish tax principles that guarantee fairness and consistency, as well as normalize the abnormal real estate system.” Another tax expert said, “In Korea, excessive heavy taxation on specific areas and multi-homeowners has caused side effects. It is necessary to carefully examine the actual policy effects and side effects of differential taxation based on the number of homes owned and comprehensively reform the system reflecting the characteristics of individual tax items.”

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