An aerial view of apartment complexes in central Seoul (Yonhap)
South Korea’s property tax rate compared with its gross domestic product was the third highest among 37 Organization for Economic Cooperation and Development members in 2018, data showed Monday.
The data compiled by Rep. Yoo Gyeong-joon of the main opposition People Power Party came amid growing concerns that the Moon Jae-in administration’s set of real estate measures -- focused on tightening loan regulations and levying heavier taxes on multiple homeowners -- failed to cool down the real estate market.
In 2018, property taxes levied by the government stood at 4.05 percent of GDP, which was $1.7 trillion at the time. The figure was nearly double the OECD average of 1.96 percent. The figure took the nation’s comprehensive real estate holding tax, which was levied from 2005, inheritance tax and taxes levied in property transactions into account.
The OECD member nations with higher tax rates compared with Korea at the time included the UK with 4.48 percent and France with 4.43 percent. The United States came at No. 4, behind Korea, with 3.97 percent, while Japan came at No.11 with 2.59 percent. Other countries with relatively high rates Canada with 3.45 percent, Australia with 2.78 percent and Spain with 2.27 percent.
The data refutes President Moon’s remarks in August last year, delivered during a Cheong Wa Dae meeting that despite its decision to increase the property holding tax, the rate remains “lower compared with other economies.”
The property tax-to-GDP rate is projected to rise further with the planned increase of capital gains tax and comprehensive real estate tax on multiple homeowners to take effect on June 1.
Under the revised rules, the comprehensive real estate tax rate on the owner of two or more properties in areas designated by the government as speculative will be raised from between 0.6 to 3.2 percent to 1.2 percent to 6 percent. The capital gains tax on houses will be raised as well.
Also, for owners selling a 2.5 billion-won ($2.3 million) house and gaining 1 billion won from the sale, the capital gains tax will be 110 million won higher from June 1.
Seoul’s apartment prices surged 58 percent after Moon took office, which is 4.5 times the increase rate of the combined period of the preceding Lee Myung-bak and Park Geun-hye governments, Citizens’ Coalition for Economic Justice, a local civic group here said in November.
By Jung Min-kyung (firstname.lastname@example.org)