Local Governments Delay Acceptance

The property tax modification plan, which had drawn protests from local governments and taxpayers, finally has been set as the government policy, maintaining its original outline.

The initial proposal announced on December 3, with little change to it, will apply to 70 percent of Seoul Gangnam area apartments, heralding more opposition.

According to the 2004 Tax Base Adjustments for Apartment Property Tax measure, the Ministry of Government Administration and Home Affairs (MOGAHA) announced yesterday, local administrators can adjust the tax base within 10 percent for apartments that have an average market price under 0.3 billion won.

Also, the standard price per square meter for new buildings, which was originally set to be raised from 170,000 won to 180,000 won, will fall back somewhat, to 175,000 won.

Minister Huh Sung-kwan of MOGAHA said, “In the case of the Seoul Gangnam area, the tentative plan was to raise the property tax by a maximum of seven times, but will decrease a little to five or six times. The non-Gangnam area apartments with average market prices under 0.3 billion won will be adjusted downward by half, from the initial 30~50 percent to 20~30 percent.”

Minister Huh also said, “From this final settlement, the tax base for property tax will differ by local government, and this deviation will expand by region. The local tax law will be revised next year, and a plan to give the power of final decision over the tax base, which the local government had, to the central government, will be pushed.”

In this final plan, the property tax reduction rate, compared with the initial plan, differs a great deal by region. This is because 87.2 percent of the apartments which are under 0.3 billion won are in the non-Gangnam area and a mere 29.2 percent in the Gangnam area.

Consequently, a 25 pyong apartment with an average market price of 0.53 billion won in the Gangnam-gu will have a property tax of 109,500 won (Seoul city had wanted to increase this to 58,600 won), an increase of 207 percent over the original 35,700 won. A Gangnam-gu 38 pyong apartment costing 0.748 billion won, which was originally taxed at 126,000 won, will be taxed at 812,000 won, increasing by 544 percent.

On the other hand, Nowon-gu 18 pyong apartment (average market price 6.3 million won) increases 19.5 percent, from 21,000 won to 25,100 won, and Gwanak-gu 67 pyong apartment (average market price 0.495 billion won) increases 16.9 percent, from 1,296,000 won to 1,515,000 won.

Cho Dae-ryong, director of the Seoul city finance bureau, held back official response saying “It is true that the increase rate has been alleviated from the initial government plan, but whether it will be accepted as it is will be decided after a computerized analysis is taken. Seoul Gangnam area district office officials replied back “This adjustment doesn’t seem to give much help to the Gangnam area.”