Policymakers seek drastic cut in real estate tax

SEJONG -- The Yoon Suk-yeol administration is considering easing the comprehensive real estate tax rate for home owners holding a single unit to a considerable extent, starting this year.

According to officials at the Ministry of Economy and Finance, the government is moving to scale back their tax burden to the level in 2020.

Deputy Prime Minister and Finance Minister Choo Kyung-ho was quoted by local media on May 12 saying that, “(taxpayers) have shouldered a three or four-fold burden due to a spike in home prices from mistaken real estate policies as well as a hike in taxation rates.”

Choo said the government “would put their comprehensive real estate burden back to the 2020 level.”

In addition, during Choo’s National Assembly’s confirmation hearing, he did not rule out the possibility that the level could be the 2021 level, alongside the possibility of the 2020 level.

The 2020 level means a full-fledged easing of the tax burden, which was drastically increased over the past two years, and the 2021 level means an easing by about 50 percent of the climbed tax, officials said.

Declared prices of apartment prices nationwide, whose increase rate stayed at 5 percent per annum from 2018 to 2020, surged by 19 percent in 2021 and 17.2 percent in 2022.

A drastic revision of the taxation rate should go through the passage at the National Assembly. Nonetheless, a revision within a particular territory is allowed -- without the parliamentary approval -- via promulgation of enforcement ordinances.

The government has the stance that it plans to unveil measures to stabilize people’s livelihood, involving a road map to revise comprehensive real estate tax, by the end of this month, according to officials.

According to Selleymon, which calculates both the property tax and comprehensive real estate tax, the payment burden of homeowners shows a wide gap according to application year for apartment prices.

A household, which owns an apartment worth 2.5 billion won ($1.9 million) at a speculation-prone district, will have to pay 3.73 million won in the comprehensive real estate tax this year. The apartment’s declared price reaches 1.99 billion won as of 2022.

When the property tax worth 6.67 million won is added, the collective tax, levied on the household’s home, is estimated at 10.4 million won.

If the 2021 level is applied for, the collective tax declines to 8.38 million -- 2.44 million won in the comprehensive real estate tax plus 5.94 million won in the property tax.

Under the 2020 level, the collective tax would stay at 5.35 million won -- 4.54 million won in the property tax plus 810,000 won in the comprehensive real estate tax.

A household, which owns an apartment worth 2 billion won in the same district, has the “zero” burden for comprehensive real estate tax, on the basis of the 2020 level.

The declared price of the home, worth 2 billion won currently, stood at 959 million won in 2020. Owners of a home worth 1.1 billion won or less could enjoy exemption from comprehensive real estate taxes.

The household will only have the burden of payment for the property tax of 2.81 million won under such scenario.

By Kim Yon-se (kys@heraldcorp.com)