Will Retroactive Application of Property Tax Cuts Go to Court?

During this year, some of the local government councils of Seoul and Gyeonggi Province have passed bills to cut taxes. Controversy has arisen over whether already levied property taxes can be reduced retroactively.

This issue shows signs of growing into a legal dispute between provincial and local governments as Seoul City and Gyeonggi Province are considering retroactively reducing levied property taxes as illegal, and plan to file a suit in the Supreme Court against local governments if they go ahead and retroactively cut taxes.

Seoul’s Yangcheon-gu Council decided to cut property taxes by 20 percent and to retroactively apply the cut starting from this year. Gyeonggi Province’s Guri City Council and Seongnam City Council held extra sessions on August 6 and 7 each, respectively, and decided to reduce property taxes by 30 percent and retroactively cut this year’s levied taxes.

In addition, Seongdong-gu, Jung-gu, and Yongsan-gu District Councils in Seoul plan to open extra sessions and discuss cutting property taxes by 20 percent in a retroactive application.

In response, Seoul Metropolitan City and Gyeonggi Province recommended the related local governments to demand the councils to reconsider, but chances of the recommendations being accepted are low. If the local government ignores the demands for reconsideration and passes the bill, the bill will be effective and only a lawsuit brought to the Supreme Court can nullify it.

Seoul Metropolitan City’s Tax Revenue Department Director Lee Sang-ha pointed out, “Although it was possible to predict property tax revenues beforehand, to cut property taxes retroactively after the tax notices were issued hampers with the stability of law. In principle, such cuts are illegal.”

On the other hand, collective objection petitions regarding the increase in property taxes have increased in Seoul and Gyeonggi Province. As of August 8, there were about 40,000 objection petitions dealing with property taxes in Seoul and Gyeonggi Province. There were about 10,000 petitions in Seoul, including 3,500 in Yongsan-gu, 2,500 in Jung-gu, and 1,700 in Yangcheon-gu. As for Gyeonggi Province, Yongin City has 28,000 petitions filed, while Bundang-gu of Seongnam City has 1,300 cases.

Although the due date for property taxes was August 2, it is possible to file an objection petition to the local government 90 after receiving the property tax notice.

If the objection is dismissed, then it is possible to file a petition requesting a review by government institutions such as the Ministry of Government and Home Affairs (MOGAHA) or the Board of Audit and Inspections. It is also possible to file administrative litigation without going through the process of review.

It has been known that in the case of Seoul Nowon-gu and Seongnam City Bundang-gu, where property taxes have sharply increased, some apartment complex residences are preparing for a lawsuit in order to receive back some of their property taxes.

On the other hard, the MOGAHA announced on August 8 its plans to create a “local tax standard assessment evaluation center” to focus solely on the standards of assessment of local taxes, such as property taxes.

An official of the MOGAHA said, “It is difficult to come up with a 100 percent accurate standard of assessment for each residence because we levy property taxes based on the cost of building an apartment and the National Tax Service’s standard market price. That is why we plan to create an exclusive organ with the personnel, budget and expertise to deal with property taxes.”