The National Tax Service, which is in charge of calculating the "standard market value" of officetels and commercial buildings, is seeking to hand the task over to the Ministry of Land, Infrastructure and Transport, while the ministry is reportedly reluctant to take it on as of the 24th. The standard market value is an index used to levy inheritance and gift tax on buildings whose market price cannot be determined.
◇ Standard market value introduced for taxation vs. disclosed housing prices implemented for use as public information
Real estate standard market value disclosures are currently split between two systems. The National Tax Service handles nonresidential real estate, such as officetels and commercial buildings, while the Ministry of Land, Infrastructure and Transport (MOLIT) handles residential real estate, such as multifamily dwellings. The officetels and commercial buildings at issue between the two ministries are subject to standard market value disclosure if they are 3,000㎡ or larger, or have 100 units or more, in the Seoul metropolitan area, the five major metropolitan cities, or Sejong Special Self-Governing City. The National Tax Service sets the standard market value by comprehensively taking into account surrounding building transaction prices, rents, and other factors for the eligible officetels and commercial buildings.
The calculation of the standard market value for officetels and commercial buildings, which is essential to prevent cases of avoiding inheritance and gift tax, has been handled by the National Tax Service since the system was introduced in 2005. The conflict between the two ministries began the same year when a housing price disclosure system was also implemented to use housing prices as public information. Because housing price disclosure was not intended for taxation, the then Ministry of Construction and Transportation (now the Ministry of Land, Infrastructure and Transport (MOLIT)) took charge.
◇ National Tax Service: "The system should be unified" vs. Ministry of Land, Infrastructure and Transport (MOLIT): "Unification offers little benefit"
The National Tax Service holds that the Ministry of Land, Infrastructure and Transport (MOLIT) should disclose the standard market value of officetels and commercial buildings. It argues that the price disclosure system should be unified by having MOLIT disclose real estate prices regardless of whether they are residential or nonresidential. In particular, because the standard market value is used to calculate inheritance and gift tax, the logic is that the taxing authority, the National Tax Service, should be separated from the agency that calculates and discloses prices to ensure objectivity and public interest in pricing.
The National Assembly has also repeatedly noted that MOLIT should disclose the standard market value of officetels and commercial buildings. When allocating last year's budget, the National Assembly Budget Office said, "A legal basis has been established for MOLIT to disclose prices of nonresidential land and buildings in a single batch," adding, "It is necessary to actively consult so that the task of disclosing the standard market value of large-scale shopping complexes is transferred to MOLIT."
However, MOLIT says further discussion is needed on whether transferring the task is appropriate. From the perspective of the public affected by the policy, it is not particularly important which agency sets the standard market value, the ministry argues, and changing the system would incur administrative expense. A National Tax Service official said, "We will continue to consult with MOLIT and the Ministry of Planning and Budget through the end of this year to transfer the (standard market value) project."