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[Editorial] Punitive Tax Imposed on Middle-Class Owners

Posted July. 13, 2005 04:12,   


Discontent is spreading among homeowners in Seoul, who received their first tax notice since the possession tax reform. They say that it is way too severe. Complaints are strong that the government is extorting money from them at a time of weak business and reduced wages. Some ward officials say that they are so busy dealing with angry inquiry calls that they delayed their vacations. The property tax burdens of those who own apartments between 30 to 49 pyeong in size increased some 40 to 50 percent.

Relatively heavy taxation on the owners of more than one house can be accepted if it does not infringe on the right to private ownership. This is because a social consensus can be reached by justifiable objects including restraining real-estate speculation and providing an opportunity for the houseless to get one. Raising the possession tax of middle-class owners, who actually own only one house that they live in, by 50 percent all at once, is almost a punishment. After the Comprehensive Real Estate Tax (CRT) was first imposed on apartments, the tax burdens of owners whose apartments’ standard market prices are more than 900 million won increased greatly, too. Most middle-and-large-sized apartments located in Gangnam and the Seoul Metropolitan area are CRT targets.

It is a basic desire of people to live in a spacious house in a region with better living conditions, and such a need makes people work harder and ultimately animate the economy. The people who are satisfied with one house for one household even when housing prices have surged as to become attractive to speculators are those who are in sympathy with the government’s measures.

Not acknowledging its policy failure but instead imposing a tax tantamount to that levied on a luxury house just because house prices increased is an example of the government’s administrational tyranny. Because of their children’s schools and their work, people are not in a situation to move; hence they cannot make a profit by selling their homes just because house prices have increased.

The government and the ruling party, nonetheless, are promoting a plan to extend the CRT to owners of houses priced more than 600 million won and additionally increase tax rates. There are a lot of people in the middle-class who form the waist of our society, living in difficulty due to reduced income caused by the long lasting recession and increased unemployment.

I even suspect that the government is trying to soothe the “jealousy” of other regions excluded from the price-hike and appease critical public sentiment on its policy failure through this policy. It is impossible to either reduce the number of “jealous” people or activate the real-estate market by hanging on to tax policies rather than promoting fundamental and long-term countermeasures according to market principles like increasing the supply of middle- and large-sized houses in regions with high demand. The experiences of the past two years have proved this.