Korea’s Property Tax Revenue Ratio Highest Among OECD Members

It was found that Korea’s property-related taxes have grown the second most rapidly following the U.K. among 30 member countries of the Organization for Economic Co-operation and Development (OECD) since the 1990s.

Korea’s proportion of property-related taxes of tax revenue is the highest among OECD members.

According to the Korea Institute of Public Finance (KIPF) on July 20, Korea’s ratio of property-related taxes per dollar of GDP reached 3.1 percent in 2002, a 0.6 percentage point increase from 2.5 percent in 1990 and a 0.2 percentage point increase from 2.9 percent in 2000. The figure is more than a 2.2 times increase from the ratio of 1.4 percent in 1980.

Property-related taxes include 22 tax items, including real estate-related taxes such as the property tax, inheritance tax, gift tax, securities transaction tax, city planning tax, and public facility tax.

The ratio of OECD members’ property-related taxes per dollar of GDP went up to 1.9 percent on average in 1990 from 1.6 percent in 1980 and has remained close to that level, standing at 2.0 percent in 2000 and 1.9 percent in 2002.

The ratio grew the quickest in the U.K. since the 1990s, posting a 1.4 percentage point increase to 4.3 percent in 2002 from 2.9 percent in 1990. France recorded the same margin of growth as Korea, a 0.6 percentage point increase to 3.3 percent in 2002 from 2.7 percent in 1990.

Both the U.S. (3.0 to 3.2 percent) and Australia (2.6 to 2.8 percent) posted a 0.2 percentage point increase each. Japan’s figure stood at 2.8 percent both in 1990 and 2002.

Korea’s proportion of property-related taxes to its entire taxes is 12.7 percent, the highest among OECD members.

An official at the KIPF said, “It seems that increasing demand for housing since the 1990s contributed to the rise in real estate-related taxes, especially transaction taxes such as acquisition and registration taxes.”

With respect to this, the Ministry of Finance and Economy explained, “As the property-related taxes that the OECD compiles includes not only real estate taxes but also securities transaction taxes, it is hard to depend solely on the data to compare the level of real estate taxes of countries.”

Chi-Young Shin higgledy@donga.com