Korean Housing Association "New Government's Real Estate Tax Reform Expected to Face Difficulties"

Tax Reform Expected to Face Difficulties Due to Tax Resistance
Conversion from Jongbuse to Wealth Tax May Raise Equity Issues
Integration Policy of Jongbuse and Property Tax Also Faces Possible Local Government Resistance

[Asia Economy Reporter Hwang Seoyul] Claims have emerged that the new government's tax reform policy will face difficulties. This is because taxpayers' tax resistance is considerable, and opposition from local governments with high fiscal demands is also expected, making the policy's feasibility low.

Professor Son Jaeyoung of the Department of Real Estate at Konkuk University stated in a keynote speech at the forum "Where Should the New Government's Housing Policy Go," hosted by the Korea Housing Association on the 8th, “Besides the minority government situation, the new government's tax reform policy is expected to face difficulties due to reasons such as tax resistance.” He emphasized that since tax resistance was confirmed through the 20th presidential election, it must be taken into account when formulating tax policies.

Regarding the Presidential Transition Committee's proposal to convert the comprehensive real estate holding tax (종부세) into a wealth tax, Professor Son said, “The comprehensive real estate holding tax does not target all assets, nor does it deduct liabilities, so it cannot be considered a wealth tax,” and argued, “Collecting the comprehensive real estate holding tax as a wealth tax will face issues of fairness.”

He also commented on President-elect Yoon Seok-yeol's pledge to integrate the comprehensive real estate holding tax and property tax, stating, “The taxes collected through the comprehensive real estate holding tax are distributed to local governments, solidifying vested interests,” and “Adjusting this will also face considerable resistance.” Currently, the real estate grant tax distributed to local governments is funded by the national comprehensive real estate holding tax. Although more comprehensive real estate holding tax is collected in the capital region where real estate prices are high, more resources are allocated to regions with poor fiscal conditions or high social welfare demands. He concluded, “In summary, it is desirable to establish a supplementary measure where the central government compensates for the loss of local government tax revenue and abolishes the comprehensive real estate holding tax.”

Professor Son argued that housing tax policies aimed at suppressing multi-home ownership cannot stabilize real estate prices. He explained, “The causal relationship that multi-home owner speculation raised housing prices has never been proven,” and “On the contrary, multi-home owners supply most of the housing rental market and function as an autonomous adjustment mechanism for the housing market.” Accordingly, he suggested, “The provisions that impose discriminatory heavy taxation on multi-home owners should be abolished and normal taxation applied,” and “In some cases, principles that favor single-home owners are also necessary.”

At the forum, there was also discussion on the need for housing welfare policies for vulnerable groups, considering the demand from youth and newlyweds. Professor Park Hwanyong of Gachon University said, “It is important for the government to accurately grasp how much housing demand there will be among youth over the next five years,” and added, “Because housing is supplied without this knowledge, young people cannot rely on youth housing.” He further stated, “Conditions should be created so that (vulnerable groups) can wait for housing welfare policies.”

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