A Hike in Property Holding Taxes

An analysis predicted a huge increase in property taxes next year for three out of five households in the Seoul area following a reform in the property taxation system for real estate.

Particularly, the property tax for one out of four households will double from this year`s rate, while it will increase by three times for 6.4 percent of households by 2008.

The city of Seoul ran a simulation on the basis of the revised taxation system proposed by the government to analyze the new figure for Seoul residents, and revealed on November 29 of its finding about how property taxes will be incremented for 60 percent of 2.29 million households who are the subjects for the new tax system, or 1.37 million households.

Consequently, Seoul-ites will have their residence property tax raised by average of 26.4 percent next year, which is projected to rise up to 65.8 percent by 2008.

Property taxes for multi-complex housing, in particular, such as apartments, will rise by 32.1 percent on average, which will increase up to 87.4 percent by 2008.

Previously, when the Ministry of Finance and Economy (MOFE) and the Ministry of Government Administration and Home Affairs (MOGAHA) announced the government proposal, only the total amount of increments for the next year (about 10 percent of this year`s total of 3.2 trillion won) was mentioned. There was, however, no data about the total for the Seoul area, which will carry the heaviest burden of the new tax hike.

According to the city, the owner of a 25.6 trillion-won worth, 74-pyeong apartment in Tower Palace Building #1 at Dogok-dong, Gangnam-gu, who now has to pay 4,901,000 won in property and the aggregate land taxes, will have to pay up to 7,352,000 won in property and composite real estate taxes next year and 13.14 million won by 2007, a 168 percent hike from the current level.

The 1.8 trillion-won Kunyoung Apartments (26-pyeong) at Sangdo-dong, Dongjak-gu, which will be levied 45,000 won in property tax this year, will be subjected to 68,000 won in residential property tax next year, and 212,000 won by 2008, a 371 percent increase from this year`s rate.

The total number of properties in the Seoul area liable for the new composite real estate tax is rising up to 24,951, including both individuals and corporations, which will turn into 408.1 billion won in tax revenue. The total is expected to double by 2008 to 47,447, or 534 billion won in taxes.

"According to the simulation, the tax burden is expected to snowball not only for the rich but for the middle class as well," says the head of the taxation department of the city of Seoul, Lee Sang-ha, adding, "Considering current economic hardships, the implementation of the new revised taxation system should be put off for another couple years and should be put under a thorough examination about its problems."

Regarding the issue, the assistant manager of the Working-level Real Estate Planning Office of MOFE, Kim Gi-tae, said, "The result of the simulation seems to reflect how Seoul has comparably less tax burden for the price of its properties." He added, "There is no change in the original plan to establish an unbiased tax system by imposing corresponding rates for property`s real estate value."

Jong-Dae Ha Ji-Wan Cha orionha@donga.com cha@donga.com