The ruling party, engaged in a daily standoff with the market over housing prices, has begun pushing for real estate tax reforms including higher holding taxes. At a forum hosted by the Democratic Party of Korea, some even proposed reducing the capital gains tax exemption threshold from 1.2 billion won to 800 million won as part of aggressive "wealth tax" measures.
Rep. Jin Sung-joon of the Democratic Party of Korea, along with Reps. Yoon Jong-oh and Son Sol of the Progressive Party, held a forum at the National Assembly on the 23rd titled "The Paradox of Premium Properties: Normalizing Real Estate Taxation." They announced plans to pursue tax reforms including strengthening holding taxes.
In his opening remarks, Rep. Jin stated, "Discussion on normalizing real estate taxation, including holding taxes, is more urgent than ever." He added, "Most experts agree that stabilizing housing prices is difficult without accompanying tax reforms." He continued, "The Ministry of Economy and Finance is conducting a research project to review the direction of real estate tax policy, including adjustments to holding and transaction taxes. We will do our best to ensure government discussions lead to effective tax reforms."
The forum also saw proposals to lower the capital gains tax exemption threshold from the current 1.2 billion won to 800 million won. Prof. Lim Jae-man of Sejong University, affiliated with People's Solidarity for Participatory Democracy, argued, "The basis for setting the current 1.2 billion won exemption threshold is weak. It should be fixed at a certain multiple of the median price. For example, at twice the median, it would be 800 million won." The exemption threshold was raised from 900 million won in 2008 to 1.2 billion won in 2021, and his proposal essentially calls for reverting to pre-2008 levels.
Calls also emerged for reforming the long-term holding special deduction, as advocated by President Lee Jae-myung. Lee Sun-hwa, senior research fellow at the National Assembly Futures Institute, criticized, "Deductions based on residency requirements reduce housing market liquidity and act as a moving penalty, reinforcing housing's function as an investment asset. This increases occupancy unrelated to actual demand, creating barriers to entry."
Proposals were also made to raise the tax base to increase holding taxes. The tax base is calculated by multiplying the officially assessed price by the fair market value ratio, and the suggestion is to phase out this ratio. Additionally, participants proposed changing the progressive tax rate system from one based on the number of properties owned to one based on property value.