Posted February. 27, 2005 22:57,
It is desirable to adjust official land prices to the market prices, as the official land price serves as the standard of land compensation and taxation including property taxes, capital gains taxes, acquisition taxes and registration taxes.
However, it is a cause for concern that an excessive rate of increase in a short period of time will bring about sharp opposition from taxpayers to heavy taxation. It cannot be overlooked that land compensation for national projects will increase the burdens of the general public. It is entirely possible that the increased official land prices will progressively incur the enmity of policyholders, who would be charged heavier financial burdens.
Did the government fully think over these side effects?
The readjustment rate of official land prices, which had been kept around 50 percent, reached 67 percent in 2003, 76 percent in 2004, and will hit 91 percent this year.
This is not to object to a taxation policy that increases land-related taxes to curb real estate speculation and that imposes a proper tax on those who benefited from ownership and transactions of land.
However, the policy should not deteriorate household balances of middle-income people, who are foreign to speculation. The maximum increase rate of 50 percent in property taxes is rather excessive, and the capital gains tax unacceptably has no upper limits.
If the building of an administrative city will be pushed forward as agreed by the ruling and opposition camps, an amount of land compensation, for which 4.7 trillion won was appropriated according to the standard of 2002, cannot help soaring.
The official land prices in the Yeongi area in Chungnam, which increased by 82 percent last year, will rise further by about 60 percent this year. It means that in order to satisfy a small number of landowners, the government is making burdens heavier for the whole nation. Consequently, some trillion won more would possibly be required to build the administrative city.
Land prices include the bubble of overestimated values. There are some lands that do not sell well even for the official land prices. A close re-examination is needed to decide on official land prices at around 90 percent of the market price at once this year.
President Roh Moo-hyun made a speech at the National Assembly on the second anniversary of his inauguration, saying strongly that there would be a war on speculation going on.
Although the national consensus on eradicating real estate speculation, an epidemic ruinous to the nation, is widespread, various realistic elements should systematically be taken into account first before administering speculation-checking policies. Short-term prescriptions of powerful medicines can cause serious side effects.