Posted May. 05, 2005 23:43,
Whether house or land, taxation on the basis of real transaction price is another step toward a transparent society. To increase the equity and transparency of taxation, it is right to assess capital gains tax by the actual transaction price.
However, in such aspects as the taxation period and the increase in tax burden, the governments real estate taxes policy is too radical and excessive. If taxes are unreasonably raised as announced in the governments statement the day before yesterday, rather than stabilizing the cost of housing, there is a high possibility that such side effects as the deterioration of the housing market and a tax revolt may occur. Such effects will not only harm the rich but also all members of the nation.
The governments policy is a carpet bombing style of tax increase aimed at real estate. Starting from next year, when those who own over two houses sell a house they do not live in, they must pay capital gains taxes according to the actual transaction price. Real estate holding taxes such as property tax and the comprehensive real estate tax will increase to over twice the current amount by 2008. If the governments decision is carried out, holding taxes, which were 2.5 trillion won in 2003, are estimated to increase to 6.4 trillion won in 2008.
However, the main target of the governments real estate tax policy, the Gangnam district of Seoul, has already been designated as a speculation area and, as a majority of the apartments there are worth over 600 million won, capital gains taxes are already being assessed according to actual transaction prices. Accordingly, there is a high possibility that only the capital gains tax burdens of owners of non-Gangnam houses, whose prices have not increased, will increase.
The increase of the holding tax burden is also excessive. On top of that, the restitution system of redevelopment profit or gains and the heavy taxation on single households with multiple houses will further wither the supply of housing by civilians. Since the government will not be able to single-handedly construct all demanded housing, there will be a high probability that before long the price of housing will rise due to the shortage of supply.
President Roh Moo-hyun even said, We will not try to revive the economy through real estate. Neglecting a dwindling construction industry, which employs two million workers and accounts for 17 percent of the gross domestic product, is not a sound economic policy.
The current government has presented over 20 real estate countermeasures, but has failed every time. This indicates that a rise in the price of housing triggered by an imbalance in demand and supply cannot be stopped by taxes. The government should lower tax rates to lessen the rapidly growing burden of the people. To fundamentally stabilize the price of housing, the supply of housing should be increased. In the big picture, the approximately 400 trillion won of immobile capital should be parlayed into improving the corporate environment to generate productive investments.