Taxation Standard to Be Raised 30 Percent

The taxation standard, which was designed for setting a standard of real-estate related tax imposition, will be increased nearly 30 percent starting from next year.

In addition, the right of taxation settlement, which is currently held by the local and municipal governing bodies, will be handed over to the central government. However, the existing policy of government that imposes taxes on both the building and premise together will be separated.

On May 31, the government held a real-estate related tax revision committee meeting presided over by the deputy finance and economy minister, Kim Kwang-lim, and has prepared real-estate possession law revision measures, which are based on the contents stated above.

According to the revision measures, the standard of assessment, which is currently lingering at the level of 39.1 percent, will be increased 10.9 percent points to reach the 50 percent level.

In addition, though the synthetic real-estate tax imposition system is to be introduced in the near future, and though it is considered one of the progressive taxation systems targeted to the rich, the government has decided to consider imposing taxes separately on premises and buildings in order to prevent skyrocketing tax payment burdens.

But, as for the people who possess a lot of real-estate, the standard of assessment has been settled extremely highly as a special clause of the law, increasing their burdens of tax payment. The exact range of the taxation increase is still hard to predict.

The government has decided to split up the taxation system on premises, which is currently managed under the synthesis premise taxation system, into premise taxes and the synthesis real-estate taxes for the premises. It will impose the premise taxes only on the premises that are in charge of municipal governing bodies such as city, district, and county.

Two measures have been suggested: that the imposition of the synthesis real-estate taxes for premises to be targeted only on large-scale owners who have more than a certain amount of the premises in terms of premise possession level, or on people who possess premises in more than two different places in a city, district, or county.

In addition, as for the taxation system for the buildings, existing property taxes will be divided into property taxes and synthesis real-estate taxes for the building, and only the buildings within an area of jurisdiction will be included in the range of property tax imposition, as suggested by the government.

As for the synthesis real-estate taxation system for buildings, three measures have been discussed such as the aggregation of housing and business buildings, imposing taxes only on housing and excluding business buildings and factories, and granting progressive taxation only on uninhabited housings. However, the progressive taxation measure has been nearly canceled due to the fact that housing leaseholders may be damaged.

In addition, of agricultural fields, forest lands, pastures, factory premises, golf courses, and country houses, those which are currently imposed by the local governing bodies in a separate imposition system will not be the target of synthesis real-estate taxation system, the government has decided.

As for synthesis real-estate taxation for premises, a measure converting the existing standard of assessment decision method to the 50 percent level of government-declared value is being considered.

The government has decided to put the “synthetic real-estate taxation law” bill into effect as soon as the bill is passed by the September regular session of the national parliament.

Jong sik Kong Ki-Jeong Ko kong@donga.com koh@donga.com