Lee Reopens Debate on Real Estate Taxation, Hints at Revisiting National Land Holding Tax

Lee to Lead Debate After Gathering Opinions on Supply, Finance, and Taxation
National Land Holding Tax, a 19th and 20th Presidential Campaign Pledge, to Fund Basic Income
Not Included as a Pledge in the 21st Presidential Election

President Lee Jae-myung has decided to take a direct approach to real estate issues. Starting from July 14, a series of sector-specific forums will be held over three days, covering topics including housing supply, finance, and taxation. On July 23, President Lee himself will preside over a national public debate. Even after announcing sweeping regulatory zones for Seoul and adjacent areas and unveiling a large-scale housing supply plan, local housing prices have continued to rise, fueling persistent anxiety among market participants. President Lee has now decided to step in personally. This comes just before the announcement of a tax reform plan, which President Lee previously referred to as a "last resort" during his presidential campaign.

In previous Democratic Party administrations, the Blue House often played a leading role in real estate policy. During the Roh Moo-hyun administration, the Blue House pushed forward with the comprehensive real estate tax (종합부동산세) despite opposition from the Ministry of Finance and Economy. When disagreements arose between ministries in 2004 and there was talk of delaying the introduction of the tax, former President Roh organized the situation with a "push first, supplement later" approach. Under the Moon Jae-in administration, policies such as a complete ban on mortgages for properties over 1.5 billion won and measures to encourage or abolish registered rental landlords were also led by the Blue House, despite opposition from ministries.

President Lee Jae-myung is speaking at the summit meeting with President Ukhnaagiin Khurelsukh held at the Government House in Ulaanbaatar, Mongolia, on the 9th (local time). Yonhap News

Lee: "Let's Discuss How to Use Property Tax Revenues"

On July 10, President Lee shared a link to a news article about the upcoming forums on social media, personally introducing several key issues. The main topic is tax policy, with a focus on property holding taxes. Both President Lee and his advisors at the Blue House have repeatedly stated their intention to increase property holding taxes while easing transaction taxes.

What stands out is his mention of "ways to utilize property tax revenues" as a key issue. This is reminiscent of the National Land Holding Tax proposed by Lee Jae-myung during the 20th presidential election. The National Land Holding Tax, unlike the comprehensive real estate tax that targets high-value properties, would be levied uniformly on all land. While this would likely generate significant tax resistance, President Lee suggested that the revenue from this tax could be used to fund another major campaign promise: a basic income. By clearly designating the use of tax revenues, the plan is aimed at appealing to non-homeowners or single-home owners, even if it draws opposition from large landowners or those with significant real estate assets. President Lee had also pledged the National Land Holding Tax during the 2017 Democratic Party presidential primary. The blueprint for this tax was reportedly designed by Nam Giyeop, head of the Land+Liberty Research Institute, an organization that has long advocated for strengthening property holding taxes based on the concept of public land ownership. However, the proposal was not included in the platform for the 21st presidential election.

A notice about property tax posted at a real estate agency in Jamsil, Songpa-gu, Seoul. Photo by Yonhap News

Debates Over the Appropriateness of the Property Tax and the Definition of High-Value Properties

The upcoming forums will also address issues such as the appropriateness of property holding taxes, the criteria for defining high-value homes, and the relationship with transaction taxes. In Korea, property holding taxes are progressive with relatively high nominal rates, but a range of deductions and low assessment standards mean that the effective tax rate is low. In particular, the official assessed value used as the tax base is typically lower than the actual market value, and further adjustments by the administration through the "fair market value ratio" create a disconnect between the taxable base and real property prices.

However, critics argue that when including transaction taxes such as acquisition tax and capital gains tax from price appreciation, the overall tax burden on real estate is not low at all. For owners of multiple homes, not only do they pay the comprehensive real estate tax, but higher rates on acquisition and capital gains taxes as well, resulting in a tax burden that is several times higher—a situation that some see as punitive taxation.

Apartments in the Gangnam 3 District viewed from Lotte World Tower, Songpa-gu, Seoul. Photo by Yonhap News

There has also been considerable controversy over the definition of "high-value homes." For example, some argue that it is unfair if someone owning several cheap homes in the provinces faces a higher tax burden than someone owning a single apartment worth tens or even hundreds of billions of won in Gangnam. Currently, for residential properties, the highest taxable bracket is for those exceeding 9.4 billion won, with a comprehensive real estate tax rate of 2.7% for those with two or fewer homes and 5.0% for those with three or more.

Additional points of contention, which President Lee has raised through various channels, include the special long-term holding deduction system, which allows up to 80% of capital gains tax to be deducted based on residence or holding period, and the fact that tax benefits can be maintained indefinitely after the mandatory registration period. President Lee has pointed out that reducing taxes simply for holding a property without actually living in it encourages real estate speculation.

This content was produced with the assistance of AI translation services.