[Editorial] Hurry With the Real Estate Transfer Tax

The Ministry of Finance and Economy has let it be known it wants to gradually reduce the exemption from transfer tax for households owning one home. Currently only expensive housing is subject to transfer tax, with most homes being exempted. We welcome the ministry's approach, since it looks like it wants to, in principle, collect transfer tax in all ownership transfers. That is not enough, however, because the government wants to reduce the exemptions gradually, and for that matter over a long period of time. One suspects the ministry is being too conscious of those who oppose reducing the exemptions because of the "tax burden" would create for people.

The reason people should have to pay transfer tax regardless of the cost of a home is clear. More than for any other reason that would be because if there is income created when a home is transferred, balanced taxation requires that it be taxed. Currently there exists a contradiction because you do not pay any transfer tax if you own one home, no matter what its prices is, but you have to pay transfer tax if you have two homes no matter how small they are. If you look at it that way, transfer tax for people owning one home can be seen as part of the process of correcting what is wrong with the tax code. It will also be needed in helping the "real deal price reporting system" take root when it becomes effective next year. If the exemptions continue not many people will be led to report their transactions accurately.

There does exist the observation that everyone is made to pay transfer tax the it will mean a big burden for the middle and common classes. That can not be disregarded, as in most cases they will own only one home and that home will be an important part of their assets. That should not be a major worry, however, as income deduction and tax amount deduction should alleviate a considerable part of the burden. That is why there is no need to drag things on over time until there is universal transfer tax. There will be limits to the effects the policy has if it is done just as the ministry says it will.

The Hankyoreh, 5 March 2005.

[Translations by Seoul Selection (PMS)]