"Even a Dry Towel Must Be Wringed"... Local Governments' Finances in the Red as Property Tax Revenue Declines

Jung-gu Takes Special Collection Measures to Overcome Crisis

A red light has turned on for local government finances due to a decrease in property tax revenue. The photo shows the view of Seoul apartments from the observatory of 63 Building. Photo by Hyunmin Kim kimhyun81@

The decline in publicly announced property prices and adjustments in tax rates have significantly reduced property tax revenues, triggering a red alert for the finances of basic local governments. District offices in Seoul plan to intensify efforts to collect and secure taxes by uncovering omitted tax sources, but given the substantial decrease in overall revenue, worsening conditions are inevitable.

Property tax levied on houses, buildings, and land is calculated by multiplying the tax base by the property tax rate. The tax base is derived by multiplying the publicly announced price, announced annually by the government, by the fair market value ratio. Since both the publicly announced prices have fallen and the fair market value ratio has been lowered, the final property tax amount inevitably decreases.

The publicly announced housing prices, which serve as the tax base, dropped by 17.3% for apartment complexes and 7.4% for individual houses. The individual land price also decreased by 5.5%. The fair market value ratio, which was temporarily reduced from 60% to 45% last year to ease property tax for single-home owners, was further lowered this year to 43% for properties priced at 300 million KRW or less, and 44% for those priced between 300 million and 600 million KRW.

The amount of property tax levied on houses and land in Seoul for the September installment this year is 4.0806 trillion KRW, down 9.8% (444.1 billion KRW) from last year’s 4.5247 trillion KRW. The July installment also decreased by 13.9% (337.9 billion KRW) to 2.0995 trillion KRW compared to last year. This amounts to over 780 billion KRW annually across Seoul.

Property tax, a local tax, is the main source of revenue for basic local governments. In Jung-gu, where property tax accounts for 56% of its own revenue (local taxes plus non-tax revenue), the significant reduction in publicly announced property prices has triggered a red alert for district revenue. Moreover, as of the end of July this year, the amount collected from its own revenue decreased by 11.5% compared to the same period last year, prompting proactive special collection efforts starting in the second half of the year to overcome the crisis.

To prevent omissions in collecting the September property tax (land portion), tax exemptions and surcharges are being thoroughly verified, and for high-value taxpayers, returned tax notices are checked and payment is encouraged through phone calls and visits to ensure no one misses the payment deadline due to not receiving a notice.

They are also meticulously reviewing whether any cases of omitted collection occurred due to the application of outdated criteria despite changes in tax exemption or reduction standards, and verifying all supporting documents from departments responsible for collecting local taxes and non-tax revenues. They plan to closely track high-value taxpayers who have established headquarters or branches in the metropolitan area, moved in, acquired high-value movable property, or have failed to respond to investigations for over four years, in order to increase tax collection rates.

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