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Comprehensive Real Estate, Property Taxes to Be Merged

Posted September. 24, 2008 08:59,   


The comprehensive real estate tax will be merged with the property tax within the term of the incumbent administration, and the assessment standards for property tax and rates will also be revamped.

The Strategy and Finance Ministry announced yesterday revisions to the comprehensive real estate tax.

If the tax is incorporated into the property tax, the tax base and rates will drastically be changed.

Each household with a property valued at 40 million won or less must now pay 0.15 percent of the value in tax; more than 40 million and less than 100 million won incurs a tax of 0.3 percent; and more than 100 million won 0.5 percent.

The new tax system will change the tax base of 40 million won and 100 million won to 100 million, 300 million, 600 million, and 900 million won. Tax rates will also be adjusted to the changed sum.

The standard sum used to assess the comprehensive real estate and property taxes will be changed to official market prices amounting to 60-80 percent of publicly posted prices. Under the current tax system, taxes are charged based on publicly posted prices and tax rates have risen every year. So in many cases, homeowners have had to pay high taxes despite declining housing prices.

Since the comprehensive real estate tax is imposed on 80 percent of the posted price and the property tax is charged on 55 percent, the government will change the assessment standards to official market prices. Exact figures, however, will be decided later.

As the new tax rules are expected to reduce tax revenue going to provincial governments, the government is mulling measures to make up the gap. One is to share revenue among provincial governments, according to a source.

On criticism that the new tax plan benefits only high-income earners, the ministry said, “Last year, 35 percent of the people who paid the comprehensive property tax earned under 40 million won. This means they spent 46 percent of their annual income on property taxes.”