Official Land Price Likely to Rise 26 Percent and Property Taxes to Increase Up to 50 percent This Year

The official land price of standard areas, which is the standard of all land-related taxes and compensations, rose more than an average of 26 percent this year.

Against this backdrop, it is expected that many regions will see land-related property taxes increase up to 50 percent, and inheritance and gift tax and the inheritance and registration tax increase by more than two digits after June 1, when individual official land prices will be fixed and take effect.

Also, the capital gains tax is predicted to quadruple depending on the region, due to the application of a graduated tax scheme.

The Ministry of Construction and Transportation announced on February 27 that the official land price of 500,000 lots of nationwide standard areas as of January 1 this year shows an average of 26.25 percent increase from last year.

The ministry explained that the rise of this year’s official land price would probably be at the highest level since 1990 when the official land price system is adopted, although it does not have related statistical data before 1998.

The ministry added that the official land price of standard areas skyrocketed this year because the government has increased the official land price based on the plan to raise it up to 90 percent of the market price, and the overall land price rose nationwide due to the development of housing land and industrial logistics sites.

With the increased official land price, various taxes calculated based on it are likely to rise by a big margin.

In particular, the land-related property tax to be imposed as of June 1 will be calculated based on the official land price reflecting increases in this year and last year at the same time, which leads to a prediction that the tax burden will considerably increase.

Government projects are also likely to face disruptions due to a sharp increase in land compensation.

Particularly, Yeongi-gun, Chungnam, which is a candidate region for a new administrative city that the government is pushing forward instead of the former administrative capital project, saw its land price rise by about 60 percent after a 82.80 percent hike last year, leading to the expectation that land compensation expenses will increase considerably.

In addition, the medical insurance premium for the self-employeds is highly likely to rise as well.

The Ministry of Construction and Transportation said that it would consult with the ministries of Finance and Economy and Government Administration and Home Affairs to prevent the tax burden on the public from increasing by improving related systems, including taxation.

Also, the Ministry of Construction and Transportation decided to conduct a second deliberation by April 20 over formal objections about this year’s official land price of standard areas, which are filed with the ministry by March 30.

Jae-Seong Hwang jsonhng@donga.com libra@donga.com