[Editorial] The Government’s Lie: “Real Estate Tax ‘Missile’ Only Targeted at Two Percent of the Population”

The residents of a 94,000-unit apartment complex in Ansan, Gyeonggi Province are refusing to pay their September residential property tax that is due at the end of the month. The reason: a large hike in property taxes caused by the reform of the local tax system, which changed the standard of taxation from “area” to “market value.” Because property taxes must be paid even when there is no income generated by property holdings, even a slight increase triggers a sensitive response from taxpayers.

Well aware of the explosive nature of property tax, the government has repeatedly emphasized that the August 31 real estate measures were aimed at just two percent of the population, including property owners liable for the comprehensive real estate tax and owners of multiple residences. It proclaimed that the remaining 98 percent will not suffer an additional property tax burden, since the standard taxation rate will be frozen at the current 50 percent of the benchmark market price for the next two years. It even launched a PR campaign that seemed to incite the 98 percent to harbor class animosity toward the privileged two percent.

The Government Information Agency distributed some 20,000 copies of a promotional document that stated, “While 45 percent of the nation lives in rented rooms, a select few own hundreds of houses apiece.” According to Dong-A Ilbo’s investigation, among the 10 property owners with 300 houses or more, seven are in the leasing service with permits from the government, and the remaining three are construction businessmen holding as-yet-unsold housing.

The majority of property owners subject to the comprehensive real estate tax will receive direct hits from the government’s “precision guided real estate missiles” despite the fact that they have nothing to do with speculation. Over the next four years, their holding tax burden will increase by an average of 700 percent. Nor is the celebrated 98 percent of the population safely outside the range of these “missiles.” For them, the effective taxation rate for property taxes will rise by a whopping 50 percent by 2009, from 0.2 percent to 0.3 percent, because the standard assessment rate will climb by five percent points each year from 2008 onward. In effect, the damage inflicted by the tax missile will only be delayed by a few years. What`s more, a substantial proportion of the middle and working classes will be liable for increased property tax next year regardless of the fixing of the standard assessment rate, as real estate prices have risen greatly in the past several months.

If only to prevent the spread of tax resistance, the National Assembly must alleviate the excessive property tax burden of single residence owners with no ties to speculation in the course of its real estate legislation. What’s needed is a dramatic cutback in taxes for the beleaguered middle class citizen, whose ability to pay tax has reached the limit due to the prevailing economic recession.