Comprehensive Real Estate Tax Anticipated to Cause Huge Repercussions

Apprehension that the comprehensive real estate tax, set to be introduced next year, could lead to a “second property tax crisis” has been emerging. In particular, a significant number of critics have pointed out that the law will have a damaging effect on the construction industry, which is expected to take a hard hit, and that such cumulative impact is “out of sync” with the government’s macro-economic policy to induce a gentle introduction of the law.

According to the Ministry of Finance & Economy’s statement on October 26, the government will confirm a real estate tax system modification bill, which includes the comprehensive real estate tax, within the week, to be put into effect starting next year as the related tax laws clear the National Assembly.

The law on comprehensive real estate tax (tentative title) will be established as a result of this legislation, along with other substantial changes to holding tax-related laws, such as the amendment of the local tax law.

The new bill divides real estate holding tax into two categories: property tax levied by cities and municipal districts according to ownership of houses, buildings, and land; and the comprehensive real estate tax levied on the level of the central government.

Especially for owners of multiple dwellings or large amounts of land, the tax burden is expected to increase greatly as comprehensive real estate tax on housing or land will be added on to the relevant local tax.

But with the bill’s impending announcement, voices of apprehension regarding the negative side-effects of the comprehensive real estate tax have been growing among experts on real estate and the tax system.

Many are also expressing their concerns that adding to the tax burden in the midst of the prevailing shutdown of the real estate market could spark a significant increase in “tax resistance.”

A movement to refuse paying taxes has already begun among owners of houses and apartments, whose tax burden has greatly increased as a result of the government’s elevation of assessment standards for property tax this year. With the tax burden set to get heavier in the coming year, such resistance is expected to escalate.

The National Association of Mayors recently adopted a resolution stating that the comprehensive real estate tax violates the principles of decentralized government and must be reverted to the level of local tax. It is currently carrying out a petition drive among the heads of the 234 local administrations nationwide.

Since most of the data on levying the comprehensive real estate tax is held by local governments, the imposition and collection of the tax will prove difficult without their support.

Ji-Wan Cha cha@donga.com