The Ministry of Economy and Finance will announce its plan to reform the national tax law to ease the burden of comprehensive real estate tax on multiple house owners. It is considering ways to abolish the heavy taxation for multiple home owners and change the standard from the number to the price of the house. This move demonstrates the government's willingness to bring an overall change to the former administration’s real estate policies, which tried to rein in soaring home prices by imposing heavy taxes on multiple house owners.
The comprehensive real estate tax was first adopted by the Roh Moo-hyun administration in 2005 when the outrage of people who did not own a house for skyrocketing house prices was at its peak. The taxation aimed at holding down the demand considering multiple home owners as potential speculators. Even though experts pointed out that increasing home supply is the only way to keep home prices under control, the then government tried to hold multiple home owners accountable for its policy failure by imposing the unprecedented real estate tax to no avail. For the past 17 years since then, the tax has gone through heaven and hell under more than 20 rounds of revisions depending on political interests.
The incumbent government wants to remove the heavy tax rate on multiple home owners because it sees the current heavy tax system did not work to curb the prices, only going against fairness and sparking controversy. In a sense, the tax is unreasonable as it imposes higher taxes on people with multiple houses at a low price than that on those with a single high-value home. However, repealing the heavy tax on people with more than one house at once and turning the comprehensive real estate holding tax as it used to be will inevitably lead to other issues of fairness. There has been a fair amount of speculators who have bought multiple houses for gap investment and earned profit margins. On this note, putting the same standards for single and multiple house owners may provoke a backlash from those with actual demand.
“As the tax was set up in haste with political purposes in the first place, it holds various problems. The then administration said that the tax will target only high-net-worth households, but the number of people subject to taxation reached 660,000. It has been a while since it was for the middle class, rather than the wealthy. New and revised tax brackets even put further tax burdens on those with an owner-occupied house. Most of all, it is a holding tax just like property tax but is imposed under entirely different standards and methods.
All that the Yoon Suk-yeol administration did to bring the issue to the public debate was to hold a public hearing at the end of last month. If the government keeps focusing on turning the tax upside down without going through a thorough review, it may not be immune to criticism that the government is only interested in making up policies with haste to highlight the failure of the previous administration. The reform of the comprehensive real estate tax should be pushed forward with an aim to stabilize the real estate market and boost the effectiveness of the tax system, without being bound down by any forms of political interests.