Seoul: The government should rethink punitive tax changes that could disrupt housing markets and burden ordinary households. The government and ruling Democratic Party (DP) held a high-level policy consultation on Sunday to discuss revisions to a tax reform plan that has thrown the housing market into confusion. On the comprehensive real estate holding tax, the DP asked the government not to distinguish between homes occupied and owned by a single owner and those that are unoccupied and to broaden circumstances in which nonresident owners can qualify as residents. The government responded positively.
According to Yonhap News Agency, such patchwork measures will not resolve the confusion. However broadly exemptions are drawn, gaps will remain and people acting in good faith will inevitably suffer. More than 10,000 public comments were submitted to the Ministry of Government Legislation during the advance notice period from Aug. 4 to Thursday, with the overwhelming majority expressing opposition. Critics objected to measures ranging from differentiated comprehensive real estate taxes on owners of one home who do not occupy their properties to replacing the long-term holding deduction with a deduction based on long-term residence.
Rarely has a government tax proposal encountered opposition approaching this level of tax resistance. The fundamental problem is the attempt to divide Korea's long-protected principle of "one home per household" into owner-occupied and nonoccupied categories, effectively treating people who own but do not live in their sole home as speculators subject to punitive taxation.
Many people rent out their homes and live elsewhere under jeonse (lump-sum key money lease) or monthly rental arrangements because of job transfers, their children's schooling, caring for older parents or grandchildren, divorce or the need to finance retirement. The very idea that the government should define exceptions and require individuals to obtain official recognition that they qualify is an excessively statist approach that disregards freedom of residence.
Other provisions also defy basic principles of reasonable taxation. These include heavier comprehensive real estate taxes without sufficient consideration for retirees with little or no income and excessively steep increases in tax rates. Is owning a single home really an offense deserving punishment?
The market is already reacting, producing unintended consequences. Home prices in Gangnam and Seocho Districts, where expensive properties are concentrated, have begun falling. Meanwhile, buying has shifted toward less expensive alternatives to the prized "one smart home," helping prices continue rising elsewhere. The result could be greater hardship for middle-class households.
The government and ruling party should abandon the tax reform framework centered on punitive treatment of single-home owners who live elsewhere and redesign it from the ground up. Strong public resistance to higher property taxes is already evident. Persisting with the current approach risks creating severe housing market disruption that would ultimately burden not only affluent homeowners but also the middle class and ordinary households.