At the "national forum on real estate taxation" hosted by the Ministry of Finance and Economy on the 16th, experts proposed that the comprehensive real estate tax should remove preferences for expensive single dwellings and be overhauled so that deductions go to primary residence rather than long-term holding.
◇ "Unreasonable elements in the current comprehensive real estate tax deduction method should be removed"
Under the current comprehensive real estate tax, a single-household, single-dwelling owner can receive deductions of up to 80% based on age and holding period. Even for high-priced dwellings, as long as it is a single dwelling, one can receive preferences simply by holding it long term without actually living in it.
Experts suggested removing the potential unfairness that can arise from this. Ham Young-jin, head of the real estate research lab at Woori Bank, said, "For example, the comprehensive real estate tax for someone who owns one dwelling with a posted price of 1.5 billion won and someone who owns two dwellings whose combined posted price is 1.5 billion won differs by more than double," adding, "This structure fuels the preference in the Seoul metropolitan area for the so-called 'one smart unit.'"
Sim Chung-jin, a professor at Konkuk University, said, "If one lives in the property for at least five years, grant a 10% deduction, and then add 10 percentage points every five years thereafter, applying a primary-residence deduction of up to 40%." He added, "Lower the maximum combined deduction rate with the senior deduction from 80% to 60%."
Meanwhile, experts were divided over raising the holding tax that combines the property tax and the comprehensive real estate tax. Nam Gi-hyeok, head of the Land Liberty Research Institute, said, "Korea's effective holding-tax rate is one-third to one-fifth that of major advanced countries (and thus low)," adding, "We should gradually raise not only the comprehensive real estate tax but also the property tax." By contrast, Ham Young-jin, head of the real estate research lab at Woori Bank, noted that a sharp hike in holding taxes could lead to listings drying up, reduced transaction volume, and rent pass-through. He proposed a limited increase by adjusting the fair market value ratio.
◇ "Lower the capital gains surtax to induce listings… abolish the long-term holding special deduction based on holding period"
Experts also said the capital gains tax should shift from granting special deductions for long-term holding to granting deductions only when the primary-residence period is long. Sim Chung-jin, a professor at Konkuk University, proposed abolishing the "deduction based on holding period" among long-term holding special deductions and allowing deductions only for those who have lived there for at least 10 years. Moon Yun-sang, a research fellow at the Korea Development Institute (KDI), suggested deducting from the capital gains tax the amount paid in holding taxes during the holding period. The intent is to raise the share of holding taxes while not significantly increasing the overall tax burden and to reduce resistance to taxes.
There was also a call to lower the capital gains surtax on multiple-dwelling owners to induce listings. Ham Young-jin, head of the real estate research lab at Woori Bank, said, "Lower the additional tax rate on multiple-dwelling owners in regulated areas by 10 to 20 percentage points," and Lee Gwang-su, head of "Gwangsu's Realty," proposed a "temporary reduction for two to three years."
Meanwhile, the government has been holding forums on supply, finance, and taxation since on the 14th. A grand forum presided over by the president is scheduled for on the 23rd. The Ministry of Finance and Economy will reflect the related details in the "tax overhaul plan" to be announced at the end of this month.