The South Korean finance ministry reported the number of people subjected to country’s comprehensive real estate tax rose 42 percent this year from the previous year. Such a rise comes due to rising home prices and hikes in the tax rates.
According to the ministry, a total of 947,000 people are subject to the comprehensive real estate taxes this year, as compared with the 667,000 people tallied for last year. This year, such people are expected to pay a combined 5.7 trillion won (US$4.8 billion) in taxes.
The country had introduced the comprehensive real estate tax scheme in 2005 with the notion to curb speculative purchase of properties.
The tax scheme is levied on owners who have multiple homes with their combined state-assessed price value exceeding 600 million won. The taxation base for owners of one home has then been raised to 1.1 billion won from 900 million won.
Such higher tax bills come as housing prices in the country have skyrocketed despite the government’s measures to cool down the property market.
The government has implemented a series of measures to curb extreme rise of home prices, through tax hikes and lending regulations. However, the measures have led to only a short-term letting up as more people have taken out bank loans to buy homes in anticipation of higher prices. It also taxes land and homes based on its annual assessment value instead of the actual market value.
According to reports, this year, the average government-assessed housing prices across the nation rose 19.08 percent. While the government in the next 10-15 years plans to raise the state-evaluated prices for all types of real estate, such as apartments and land to up to 90 percent of their market prices.
The government has also sharply increased the comprehensive real estate tax rates on multiple home owners. The tax rates were raised to a range of 1.2 to 6 percent.
The public discontent over the government’s housing policy has also increased in recent times as runaway home prices are driving up tax burdens on home owners and raised costs for people who wish to rent or buy homes.