“Confused Policy Brought the Unrest of House Price”

Korea Development Institute (KDI), government economic research institute got started criticizing the real property control measures of the government such as the property tax, reconstruction, apartment tax investigation.

In addition to the general business flow, KDI presented an analysis of the real property-related policy and its measures through a report of economic outlook on October 18. It is unusual for KDI to publish the definite criticism report for the government’s measures.

In this report, KDI indicated “The government used to publish the real property-related measures, but it didn’t won public confidence because the measures were not continued steadily. A lack of confidence on the policy consistency is one of elements of the real property price unrest.”

For the real property measures published by the government after 1998, there are 36 housing measures published by the ministry of construction and transportation (MOCT) and 40 measures including the taxation system of the ministry of finance and economy (MOFE).

KDI insisted “The government needs to present a schedule when publishing the policy. There must be the system that the nation can verify an implementation of the schedule regardless of the short term increase/decrease of the real property price.”

Especially, It also insisted that the government must restrain a repeated exercise of administration such as implementing the tax investigation by National Tax Service (NTS) frequently when the unrest of the property price is shown.

KDI said, “The tax investigation is the policy means which must be strictly executed, but it is very flexible depending on the business situation. Accordingly, it has drop public conference on the government’s policy.”

It also indicated that the strengthening of the reconstruction condition of the government must be reviewed again. Decreasing the supply through limiting the new sites supply excessively and controlling the reconstruction conditions strictly, the policies of the government goes against the flow of the market.

The abnormal taxation structure of property tax becomes also a subject of criticism.

Cho, Dong-Cheol, the researcher of KDI insisted “A tax base of property tax is set lower than the actual property price, but progressive tax rate is too heavy. When the tax base of property tax exceeds KRW 40 million, an excess of the tax base will be charged by 7% of tax, but it is an obstacle in realizing the tax base.”

MOFE officials said, “It is a fact that there is the criticism on the frequent property measures. However, we are taking the new measure carefully when taking the strong measures at once.”

Kwang-Hyun Kim kkh@donga.com