Government Plans Direct Regulation of Green Fees

November 'Sports Facility Amendment' Enforcement Decree Controversy, Public Golf Course Price Adjustment 'Mandatory', Government "Green Fee Reduction Effect" vs Golf Industry "Only Tax Collection"

Controversy continues over the government's amendment to the enforcement decree concerning sports facilities at golf courses.

[Asia Economy Reporter No Woo-rae] The government's efforts to lower golf course fees through related legal amendments are stirring controversy. Critics argue that by offering tax reduction benefits, the government is effectively setting a price ceiling on golf course fees, which constitutes artificial market intervention.

According to the industry on the 12th, the Ministry of Culture, Sports and Tourism disclosed a draft amendment to the Enforcement Decree of the "Act on the Installation and Use of Sports Facilities" (Sports Facilities Act) on the 7th, targeting officials from the Korea Public Golf Course Association and others. This draft, scheduled for legislative notice at the end of this month, contains detailed implementation plans for the law passed by the National Assembly in April. The core point is that the current tax reduction benefits granted to non-member golf courses will only apply if the golf course usage fees (green fees) meet certain standards. According to the government's proposal, from November 4, when the law takes effect, non-member golf courses must charge green fees below the government-set ceiling to continue receiving property tax and individual consumption tax reductions.

◆ Government intends to directly control fees amid complaints of "too expensive" rates = The amended Sports Facilities Act effectively subdivides golf course businesses, which were previously categorized as member and non-member types, into member, non-member, and public types. Until now, non-member golf courses were exempt from individual consumption tax and received property tax reductions, but going forward, only those meeting usage fee and other legal requirements will be designated as public golf courses and receive tax benefits. Currently, member golf courses are subject to an individual consumption tax of KRW 21,120 per person and a property tax rate of 4%. In contrast, public golf courses are exempt from individual consumption tax and have a reduced property tax rate of 0.2% to 0.4%.

Notably, according to the government's disclosed draft amendment, existing non-member golf courses must keep green fees below the member golf courses' peak season non-member average fee minus the tax benefit amount to continue receiving such tax benefits. Industry estimates suggest that when the tax benefit is divided per user, it amounts to approximately KRW 36,000 to 40,000. According to the Leisure White Paper, the average non-member green fee for 71 member golf courses in the metropolitan area is KRW 217,000 on weekdays and KRW 276,000 on weekends. To be designated as public golf courses maintaining tax benefits, non-member golf courses would need to reduce green fees to KRW 177,000 on weekdays and KRW 236,000 on weekends.

◆ The cause is supply and demand... "Only public golf course supply will shrink" = The industry fears that the government's artificial price intervention could backfire. The primary reason for the recent skyrocketing golf course fees is the COVID-19 pandemic restricting overseas golf and a rapid increase in golf participation, especially among the 20s and 30s age group, according to industry claims. The fundamental issue is supply-demand imbalance, but the government has proposed an easy short-term solution of fee regulation without addressing the root cause.

An industry official said, "While it is true that golf course usage fees have risen excessively in a short period, the government's direct regulation of leisure fees, which are not essential goods, is an outdated idea," adding, "By that logic, the government should also directly regulate peak season accommodation and restaurant fees."

There are also forecasts that fee regulation will rather shrink the supply of public golf courses. Construction costs for an 18-hole golf course range from KRW 100 billion to 120 billion, and under fee regulation, developers might prefer member golf courses, which can recover construction costs early through membership sales, or non-member courses with freer fee setting, over public golf courses. There are concerns that many non-member golf courses might pass on the increased tax burden to consumers. The Public Golf Course Association pointed out, "The policy to lower non-member golf course prices could ironically result in fee increases," emphasizing that "price regulation contradicts the principles of a free market economy."

◆ Voices for self-regulation within the industry = As of the end of last year, public golf courses accounted for 61.9% of the 573 golf courses nationwide, up 12.2 percentage points from 49.7% in 2016. Especially, most golf courses established in the past 10 years are public, and there has been an increase in member courses converting to public courses due to tax benefits.

According to the Leisure White Paper, among 69 golf courses scheduled for amendment by 2026, 68 are public and only one is a member course. The industry estimates that if fees are reduced by KRW 36,000, the additional tax burden on golf courses would be approximately KRW 2.88 billion, and KRW 3.2 billion if the reduction is KRW 40,000. They argue that as tax burdens reduce profitability and green fees rise, leading to fewer users, investment enthusiasm in public golf courses will wane. Therefore, industry and academia advise that "since 5.14 million people, or 9% of the population, enjoy golf, it is more reasonable to let market functions regulate supply and demand rather than impose price controls."

However, there are also belated voices of self-reflection, suggesting that the industry should have stopped competitive fee hikes and made self-regulatory efforts. In fact, among public golf courses in the metropolitan area, movements to reduce excessive green fees are being detected.

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