Rising Property Taxes Rile Homeowners

Hong Jeong-woon (alias, 59), who lives in a 30-pyeong apartment in Banpo-dong, Seocho-gu, Seoul, gets upset every time he sees the receipts of the property taxes he has paid over the recent years.

It is because the property tax, which was 790,000 won in 2004, increased to 1.14 million won last year, and this year he will pay upwards of two million won of possession tax with comprehensive real estate tax included.

“The current administration seems to be obsessed only with collecting taxes,” said Hong. “When I get my tax notice next month, I will file a class-action protest along with residents of my apartment complex.”

Around July 10, local governments will send property tax papers to citizens, and the due date is from July 16-31.

Comprehensive real estate tax skyrockets despite lowered property tax-

Twenty and 17 local governments out of 25 districts of Seoul, and 31 cities and counties of Gyeonggi, respectively, applied elastic tax rates and reduced property taxes by 10 to 50 percent.

Their measures are aimed at helping reduce the tax burden on residents, considering their resistance to the property tax rate set by the central government.

The recent simulation shows, however, that even if property taxes are reduced greatly, comprehensive real estate taxes augment considerably, thus increasing the possession tax burden on citizens as well.

To take an example, residents of Miseong 2 Apartment (47 pyeong) in Apgujeong-dong, Gangnam-gu, where property taxes were lowered by half this year, should pay 1.0525 million won of property taxes this year, which is about 70,000 won less than last year’s 1.127460 million won.

But the standard market price of this apartment this year is 946 million won, which means residents have to pay a comprehensive real estate tax (owners of more than 600 million won-worth housing should pay it). Therefore, Miseong 2 residents should pay a total of 3.203 million won of property and comprehensive real estate taxes, almost three times more than what they paid last year.

Strong backlash against “Tax Bombs” may be the reason-

The possession tax this year soared sharply because the government announced prices of multi-family houses nationwide and Seoul went up by 16.4 percent on average and 21 percent, respectively.

“Seoul citizens bear such a grave possession tax burden, as the officially announced housing prices went up and the minimum price of houses whose owners should pay comprehensive real estate tax was changed from more than 900 million to 600 million won,” said a Seoul government official. “Chances are that an uprising resulting from heavy taxation may occur.”

Moon Hyun-cheol (51, alias) in Yatap-dong, Bundang-gu, Gyeonggi said, “I plan to take legal action with residents of this neighborhood and Seoul where apartment prices increased. We could file a constitutional complaint.”

Experts blamed the government’s real estate policies, saying its emotional measure to increase possession taxes, aimed at “bashing apartment or land owners,” was the problem.

Professor Lim Ju-young, an expert in tax studies at the University of Seoul, said, “The assessed standard market price of buildings or land, which serves as the standard of property taxation, has risen too sharply. This policy will inevitably bring about strong opposition from those who own one house per household.”

Tae-Hun Hwang beetlez@donga.com