Attention is focusing on why the government decided to raise the comprehensive real estate tax rate starting with dwellings valued at more than 3.2 billion won on the market (officially assessed at 2.3 billion won, taxable base 600 million won). Dwellings in this range number about 130,000 to 140,000 nationwide, the top 0.8% to 1%.
President Lee Jae-myung said at a Cabinet meeting on the passed month that, given public opinion that the threshold for ultra-expensive dwellings is 3 billion won on the market, "Isn't that too harsh?" and added, "If the market price is 3 billion won, the official assessed value is only a little over 1 billion won. I thought it would be around 5 billion won."
The Ministry of Economy and Finance is said to have designed the system so that, based on a single owner-occupied dwelling, the comprehensive real estate tax burden is reduced up to a market price of 3 billion won, then gradually increased above 3 billion won, with a sharp rise starting in the 4 billion won range.
Effectively, dwellings above 3 billion won on the market are classified as "high-priced dwellings," and those above 4 billion won as "ultra high-priced dwellings." Dwellings valued at more than 4 billion won on the market number around 60,000, or about the top 0.4%. Most are concentrated in specific areas such as Gangnam, Seocho, Jamsil, and Yongsan in Seoul.
A real estate expert said, "From the government's perspective, it appears to have finally set the taxable price band at a level where it can explain that most people will not be hit by the tax reform and that it has implemented a pinpoint tax increase only on holders of ultra high-priced dwellings."
The reason the comprehensive real estate tax rate was raised for the 3 billion to 4 billion won market-price band is reportedly an internal analysis showing that if the basic deduction is increased from 1.2 billion won to 1.4 billion won, the comprehensive real estate tax for owners in this band could fall significantly. The tax rate in this band will rise from the current 1% to 1.3% next year.
A senior official at the Ministry of Economy and Finance said, "As we designed the system to reduce the tax burden for dwellings under 3 billion won on the market and increase it starting in the 4 billion won range, we raised the rate so that the tax burden in the middle ground of 3 billion to 4 billion won would also increase gradually." The official added, "We also intended to prevent the comprehensive real estate tax rate from jumping sharply starting above 1.2 billion won."