An increasing number of local governments are lowering property taxes. When the Gyeonggi province city of Seongnam announced it was revising its ordinances to lower housing property taxes by 50 percent, we asked the national government to take strong action to prevent such activity from spreading to other local governments. It did warn that it would penalize local governments when it came time to divide up revenues from the "integrated real estate tax" if they lowered their property tax rates. The integrated real estate tax dose not account for much, however, so places with stable finances do not care in the slightest. The cities of Guri and Yongin have given the public official notice of changes in their tax ordinances, and other areas on Gyeonggi are considering following suit. Neighborhood governments in Seoul will be doing the same soon enough.
Property tax is indeed a major area for tax resistance. But tax resistance is justified when a local government's property tax structure is normal and when it increases rapidly and as a whole. Right now the situation is different. There are places where property taxes have risen a lot since last year and places where they have been reduced unreasonably, but even when they rise they are less than other areas with similar housing prices. Meanwhile it would also be hard to see these moves on the part of local governments purely as tax resistance. It is largely about next year's local elections. The group Citizens' Union for Land Justice is attacking the heads of local governments for their "political motives" and is calling on them to reconsider the issue from the perspective of the better good.
The problem is that persuasion is not enough to solve the problem. As we have noted previously the solution needs to be a legal one. The integrated real estate tax is a national tax, and the best thing to do with it would be to expand the revenue sources on which it is based while reducing the importance of property taxes. When it comes to real estate taxes, local governments collect them and give the national government its share before then collecting integrated real estate tax funds. Therefore, if you make the integrated real estate tax account for more of the equation there it is still going to have little effect if local governments lower their property taxes. It was a painful occurrence to have the current government and the ruling party relax the standard for taxation based on the integrated tax by increasing it from W600 million to W900 million. Even if the national government has to use the temporary measure that would be largely reducing financial support, it has to fix the integrated real estate tax so that the local government property tax cuts do not become yearly rituals.
The Hankyoreh, 16 April 2005.
[Translations by Seoul Selection (PMS)]
[Editorial] Strengthen the Integrated Real Estate Tax |
