Yejeongcheo "Property Tax Relief Plan Should Consider 'Tax Burden Cap and Officially Announced Price Rate Adjustment' Together"

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[Asia Economy Sejong=Reporter Son Seon-hee] Concerns have been raised that the government's decision to use the previous year's fair market value ratio (officially assessed price rate) to ease property holding taxes for first-home owners may only serve as a temporary stopgap measure. There are worries that applying the current year's official price again after one year could cause a more abrupt increase in tax burdens and undermine policy consistency.

In the report titled "2022 Housing Official Price and Property Tax System Discussion Trends," published on the 22nd by the National Assembly Budget Office, analyst Park Jeong-hwan of the Tax Estimation Analysis Office pointed out, "Considering taxpayers' legal stability and predictability, adjustment measures such as tax burden caps and fair market value ratios need to be comprehensively considered together with the application of the previous year's official housing price."

The nationwide housing official price increase rate announced by the government last month averaged 14.9%. This marks a continuation of the double-digit rise following 16.3% in 2021, after years of remaining below 5%. In particular, Incheon (26.9%) and Gyeonggi (21.3%) exceeded 20%.

Analyst Park explained, "The 2022 official price increase mainly stems from the housing price rise in 2021, and the government's policy to enhance the official price realization rate also played a complex role. Housing holding taxes (comprehensive real estate tax and property tax) are expected to increase in line with the rise in the taxable official housing price."

Accordingly, to alleviate excessive property tax burdens, the government announced last month its plan to use the previous year's '2021 official price' when calculating the taxable base for property taxes for first-home owners. According to estimates by the National Assembly Budget Office, this tax relief measure is expected to reduce tax revenue by approximately 980 billion KRW. Various property tax relief proposals have also been sporadically raised in the National Assembly.

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However, such property tax relief policies are criticized as merely 'one-year' temporary measures that undermine taxpayers' legal stability and predictability. Analyst Park said, "If property taxes are calculated based on the current year's official price from 2023 onward, first-home owners may feel a significant increase in their tax burden." He also pointed out, "While the 2022 official price exists, calculating property taxes based on the 2021 official price creates a temporary situation where dual taxable price standards are applied depending on the number of homes owned."

He also raised the need for fundamental improvements to the official price, which is a factor that absolutely affects taxpayers' tax burdens. Analyst Park said, "Although the current official price realization rate influences tax burdens, it is necessary to review whether it is appropriate for it to be determined solely by the Ministry of Land, Infrastructure and Transport's guidelines."

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