Posted November. 14, 2008 08:15,
The Constitutional Court ruled partially unconstitutional yesterday the comprehensive real estate tax on owners of more expensive homes.
The ruling said the regenerative tax system of imposing high taxes on all single-home owners excessively infringes on an individuals right to property.
As a result, the National Assembly must make an exception to people who have owned one home for a certain period by the end of next year or change the comprehensive real estate tax by adjusting the tax base or rate. If no revision is made, the article on imposing real estate taxes on homes under the comprehensive real estate tax will expire in early 2010.
In a 7-2 ruling, the court said charging the comprehensive real estate tax on the combined sum of homes held by members of a household is unconstitutional.
From this year, those taxed on the combined sum of homes will pay taxes based on the sum of homes each member owns. If an exception is made for the long-term owner of one home, the tax base for the comprehensive real estate tax will decrease.
The court said, Charging more taxes to married couples or families is against Article 36, Clause 1 of the Constitution that stipulates more protection for married couples and families.
The clause on charging taxes on the combined sum of homes can be justified in that it prevents tax evasion, but owning property through inheritance among family members is not necessarily intended to evade taxes.
The court maintained the basic frame of the comprehensive property tax, saying its purpose is justified.
The court also made clear that the comprehensive real estate tax does not overlap with the property or transfer taxes; it is not a tax on unrealized income; it is not unconstitutional if all real estate taxes exceed the propertys price; and the tax does not violate the financial rights of provincial governments though defined as a national tax.
The comprehensive real estate tax was passed by the National Assembly in Jan. 2005 and underwent a revision in December. The Constitutional Court made rulings on seven cases, including a constitutional appeal filed in Dec. 2006 and a case on unconstitutionality filed by the Seoul Administrative Court in April this year.
Strategy and Finance Minister Kang Man-soo said, After considering the Constitutional Courts ruling, I will announce follow-up measures Friday.