[Editorial] Real Estate Tax and Housing Prices

The government is agonizing over what action to take to stabilize housing prices. There are various factors contributing to the rise in prices, but a large factor is the fact that real estate taxes such as the "comprehensive real estate tax" turns into a "paper tiger" in the course of implementation. There would be less speculative demand for housing if only the real estate tax structure were in order.

The move to improve real estate tax has been pursued along two lines, namely the adoption of "comprehensive real estate tax" and making property tax assessment standards more realistic. Last year, however, the government and ruling Uri Party retreated quite a bit on "comprehensive real estate tax." They want the standard market price to be higher than W900 million instead of over W600 million, the standard of taxation to be adjusted to 50 percent of the standard market price, and to set a cap on tax hikes so that they do not exceed 50 percent of the previous year. Since taxes are based on people, when a married couple divides things up they can avoid comprehensive real estate tax by up to W1.8 billion. They are again taking tax resistance into consideration and decided to cap property tax increases at 50 percent, making it meaningless to say that local government bodies are making assessment standards more realistic by lowering them 50 percent. It is not just the ruling party; economic officials also have a great deal of responsibility. Instead of working to persuade the ruling party at party-government consultations you suspect they retreated from their position as if waiting forth the opportunity to do so. It was lazy of them to not foresee how local governments would react.

The government is examining a plan to improve the "comprehensive real estate tax." We call on it to return to the original proposal in its original state, since it has been given the scissor treatment. The membership of the National Assembly must stop unconstructive interference. Most people are common and middle class citizens and not the few who own multiple dwellings. Granted, real estate taxes cannot be the whole answer when it comes to housing prices. However, it will be hard to stabilize housing prices over the long run without making it less desirable to own multiple homes. There also needs to be action taken that silences tax resistance from the common people, for example by reducing the tax burden for people with one home.

The Hankyoreh, 21 June 2005.

[Translations by Seoul Selection (PMS)]