Yejeongcheo "Consider Adjusting Tax Burden Cap and Fair Market Value Ratio"

Announcement of This Year's Officially Publicized Prices on the 29th... Buffer Measures Needed Along with Applying Last Year's Prices

The number of districts in Seoul where the average apartment sale price exceeds 50 million KRW per 3.3㎡ has more than doubled in one year. As of November last year, only Gangnam-gu, Seocho-gu, and Songpa-gu among the 25 districts in Seoul had average apartment sale prices exceeding 50 million KRW per 3.3㎡, but last month, Yongsan-gu, Seongdong-gu, Mapo-gu, and Gwangjin-gu were added, making a total of seven districts. The photo shows the view of Seoul apartments from 63 Square. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Min-young] Ahead of the announcement of this year's publicly announced property prices on the 29th, the National Assembly Budget Office has drawn attention by arguing that adjustment measures such as the cap rate on tax burden and the fair market value ratio should be prepared along with the application of the previous year's publicly announced prices. Since the publicly announced prices rise every year in line with housing prices, these mechanisms are necessary to impose property holding taxes within a range predictable by taxpayers.

In the report titled "2022 Housing Publicly Announced Prices and Property Holding Tax System Discussion Trends" published on the 22nd, Park Jeong-hwan, an analyst at the Tax Estimation Analysis Office of the National Assembly Budget Office, pointed out, "Considering the legal stability and predictability for taxpayers, adjustment measures such as the cap rate on tax burden and the fair market value ratio need to be comprehensively considered together with the application of the previous year's publicly announced prices."

The average increase rate of this year's publicly announced housing prices announced by the government in March was 14.9%, which is 1.4 percentage points lower than 2021 (16.3%) but higher than the average increase rate from 2016 to 2020 (5.3%). This is the result of a combination of last year's housing price increase and the government's policy to enhance the realization rate of publicly announced prices. Last year, the nationwide housing sales price index rose by 9.9%, about 8 percentage points higher than the average increase rate of 1.7% from 2016 to 2021. The realization rate of publicly announced prices for apartment complexes slightly increased from 70.2% last year to 71.5% this year.

As an increase in property holding tax revenue is expected due to the rise in housing publicly announced prices again this year, the government announced in March a "property holding tax relief plan for single-homeowners." The core content was to use the previous year's publicly announced prices when calculating the property holding tax base for single-homeowners this year. The government plans to submit the "Partial Amendment Bill to the Restriction of Special Taxation Act," including the single-homeowner tax burden relief plan, to the National Assembly. Separately, the Ministry of Land, Infrastructure and Transport will finalize and publicly announce this year's publicly announced prices on the 29th, based on the opinions collected until the 12th of this month and reviewed by the Central Real Estate Price Public Announcement Committee. The transition team and the Ministry of Land plan to immediately start revising the publicly announced price roadmap after the new government takes office.

The Budget Office pointed out that the government's announced property holding tax relief plan could be a temporary stopgap and may undermine policy consistency. Analyst Park Jeong-hwan said, "If property holding tax is calculated based on the current year's publicly announced prices from 2023 onward, the perceived increase in tax burden for single-homeowners could be significant," adding, "While the 2022 publicly announced prices exist, calculating property holding tax based on the 2021 publicly announced prices may temporarily apply dual tax price standards depending on the number of houses owned."

To minimize such side effects, he advised that buffering measures should be prepared along with the application of the previous year's publicly announced prices. The cap rate on tax burden was included in the tax reform proposal recently suggested by Seoul City to the Presidential Transition Committee, and the adjustment of the fair market value ratio is part of President-elect Yoon Seok-yeol's property holding tax relief plan. Analyst Park said, "Considering the legal stability and predictability for taxpayers, adjustment measures such as the cap rate on tax burden and the fair market value ratio need to be comprehensively considered together with the application of the previous year's publicly announced prices."

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