Comprehensive real estate tax to be reformed in 10 years

Jul 04, 2018, 08:21 am

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Kang Byung-goo, chairman of the special presidential committee on fiscal reform, speaks at a general meeting in Seoul on Tuesday./ Source: Yonhap News

By AsiaToday reporter Joo Sung-sik

The comprehensive real estate tax, one of the typical property taxes, will be reformed for the first time in a decade. The real estate tax rate will be raised by 0.05-0.5 percent point. The threshold for imposing progressive financial income tax will be lowered to 10 million won from the current 20 million won for the first time since 2013 to expand the range of tax subjects.

The lease income tax, which is levied on owners of multiple properties or high-priced single housing, will be restructured to eliminate or reduce its tax benefits.

The fiscal reform special committee under the Presidential Commission on Policy Planning, held a general meeting on Tuesday to wrap up its state fiscal reform discussion and submitted its reform proposal to the government to enhance the country's fiscal stability.

The fiscal reform committee proposed to gradually increase the fair market value rate on an annual rate of 5 percent points. The composite cumulative land tax rate is expected to rise by 0.25-1.0 percent point, while the separately summed land tax rate is expected to climb by 0.2 percent point.

The comprehensive tax was eased in 2008 during the Lee Myung-back administration. According to the fiscal reform committee, the alleviation drastically cut down on the number of corresponding taxpayers and the total amount paid, eventually worsening the nation's tax justice.

Since the tax revision in 2008, the number of comprehensive real estate taxpayers decreased by 47.3 percent, with the total amount dropping by 77 percent from a year earlier. As of the end of 2015, the rate of the property tax to the gross domestic product (GDP) fell to 0.8 percent and the effective tax rate of property tax was 0.16 percent. This is significantly lower than the OECD average of 0.33 percent over the same period.

The committee estimated that some 346,000 home owners would be affected by the plan, resulting in an increase of about 1.1 trillion won in revenues.

The government is expected to reflect the final proposal in a tax reform plan to be announced later this month and seek the National Assembly's endorsement in September for its implementation next year.

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