Academics in public finance criticized the government's real estate tax measures included in this year's tax reform plan as resembling a "French-style wealth tax." While fairness was cited as the rationale, concerns were raised that the policy objectives remain unclear.
Kim Woo-cheol, president of the Korean Society of Public Finance, stated at the roundtable held on the 5th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul: "The tax burden has been concentrated on high-value homes, but is this a normalization of property taxes or a French-style wealth tax?"
Kim Woo-cheol, president of the Korean Society of Public Finance and professor of taxation at the University of Seoul, served as moderator for the roundtable. Participants in the discussion included Sung Myung-jae from Hongik University Gyeong Je-hak-bu (Prof.), Song from Constitutional Court University of Seoul Gyeong Je-hak-bu (Prof.), former National Assembly Budget Policy Office Tax Analysis Reviewer Shim Hye-jung, and Jung Da-won, research fellow at the Korea Institute of Fiscal and Economic Research.
Among the tax reform proposals discussed that day, content related to real estate taxation received particular focus. Criticism continued regarding the government's excessive tax burden.
Professor Song stated: "It is desirable for individuals with high tax capacity to pay more taxes, but some homeowners of high-value properties utilize loans." He added, "Borrowers have lower net assets, so their tax capacity should be recognized as relatively low, and their tax burden should be reduced accordingly."
Professor Jung remarked: "There is a sense that the supplementary real estate tax rate has been raised excessively. While I do not see major objections to those owning apartments valued at 4.5 billion won or more having sufficient capacity to bear the tax burden, I am concerned about the haste of this increase from the perspective of predictability."
He further noted: "I am worried about properties in the 2nd billion to 3 billion won range. Although it is claimed that the actual tax burden will decrease or remain similar, this assumes identical housing prices. Since most housing prices are expected to rise, the actual supplementary real estate tax burden will increase."
He also pointed out the expansion of the supplementary real estate tax scope. Professor Jung stated: "The supplementary real estate tax was designed for the top 1% of asset holders, but government announcements suggest it now covers over 2%. Although the exemption threshold has been raised to 1.4 billion won, this remains low compared to rising housing prices and warrants review."
Criticism was also raised regarding the unclear criteria for "normalizing tax burdens," which was cited as the rationale for the tax reform. Former Reviewer Shim emphasized: "The government has proposed fair taxation, but it must clearly specify whether the goal of tax policy is income and wealth redistribution or includes real estate price stabilization."
Former Reviewer Shim added: "South Korea's property holding taxes are levied on unrealized asset value appreciation, which may create a gap between tax capacity and actual burden if the tax burden becomes too high. It is also necessary to consider equity in the overall household asset composition and the distribution of tax burdens across different asset types."
Analysis also indicated that there would be no redistribution effect from supplementary real estate taxation. Professor Sung explained: "The redistribution effect achieved through supplementary real estate taxation is effectively 'zero.' Ultra-high-net-worth individuals hold significant financial assets, which are not subject to holding taxes. For others, housing assets constitute a large portion of their wealth; taxing only housing assets heavily does not achieve redistribution."
There was also an opinion that frequent tax reforms have complicated the tax system, exacerbating taxpayer confusion. Professor Kim stated: "The complex and highly progressive property tax has been made even more opaque and difficult to understand. This further confirmed the pattern that whenever the government changes, real estate tax policies inevitably change."
in ECONOMY
