The ruling Democratic Party of Korea is seeking to lower real estate taxes.
Rep. Song Young-gil, the chairperson of the party, said at the first meeting of its special committee on real estate issues Wednesday that property and capital gains taxes are an imminent problem. He called for a quick decision on tax adjustments.
Rep. Park Wan-joo, the party’s chief policymaker, said in a policy coordination meeting Thursday that the party would seek to lessen the tax burden on homeowners who do not possess second homes.
The committee is said to be considering expanding the scope of property tax reductions for homeowners without second homes. Currently, property taxes are reduced on homes worth 600 million won ($530,000) or less by state-assessed value. The panel is mulling raising that amount to 900 million won.
A Democratic Party lawmaker proposed raising the lower limit of the assessed value beyond which a home is subject to comprehensive real estate taxes from 900 million won to 1.2 billion won.
As the main reason for its crushing defeat in the April 7 by-elections in Seoul and Busan, the party cites the Moon administration’s failed real estate policies, which have caused a sharp rise in housing prices and a severe shortage of rental housing.
The party foresees little chance of winning the next presidential election, slated for March next year, unless it can assuage the public’s anger.
But the presidential office is holding fast to its existing policy stance, focused on reining in speculation.
Lee Ho-seung, President Moon Jae-in’s top policy aide, views the idea of weakening comprehensive real estate taxation negatively. He said on a radio program Wednesday that caution is warranted regarding a proposal to raise the lower limit of assessed values subject to the tax.
Under the Moon administration, the real estate tax burden has risen sharply.
The administration has not only propelled tax rates higher, but has also raised the assessed values that are used to determine holding taxes. As a result, most middle-class homeowners face tax bombshells.
From next month, capital gains taxes will increase 40 percent to 70 percent for anyone who sells a home after owning it for less than a year. If the home is sold after the one-year mark but before two years have passed, the rate will rise to 60 percent.
The government is looking to push landlords to sell the homes they rent out, but heavy transfer taxes make it difficult to do so.
Capital gains taxes need to be lowered to stimulate transactions and increase the housing supply.
The number of homes assessed to be worth more than 600 million won surged 63.4 percent to 1.12 million this year from a year earlier.
The number of apartments subject to comprehensive real estate taxes -- that is, those whose value has been assessed at more than 900 million won -- jumped to 523,983 this year, having increased 5.7 times over the past four years. Sixteen out of 100 apartments in Seoul have become objects of the tax. Introduced in 2005 as a sort of tax on the wealthy, it seems to be turning into a general tax.
The government has increased tax pressure on owners of multiple homes in an effort to persuade them to put their properties up for sale, but the policy has failed.
Homeowners are paying dearly for a misguided policy that has caused housing prices to skyrocket.
Housing prices have jumped, but homeowners who choose to keep living in their homes instead of selling them reap no profit. Taxing this nonexistent profit almost punitively is no different from extortion.
It is desirable to limit the comprehensive real estate tax to a tiny minority of the rich as originally intended.
Property taxes and comprehensive real estate taxes will be fixed based on assessed values as of June 1. It is important to modify wrongheaded policies, but it is hard to expect the desired effects if the party misses the timing.
If it is willing to adjust its course, it should not dawdle but should take bold, swift action.