Abolition of comprehensive real estate holding tax can worsen gap between have and have-not in local finances

Activists of the Residential Network talk at a press conference. Reporter Han Soo-bin

If the comprehensive real estate holding tax is abolished and integrated into property tax, fiscal income in three Gangnam districts (Gangnam, Seocho, and Songpa-gu) in Seoul will increase by nearly 1 trillion won, but eight districts in Gangbuk will decrease by nearly 90 billion won. While the presidential office has stated that "abolishing comprehensive real estate holding tax is in fact desirable," there are concerns that abolishing the tax could worsen the gap between the rich and the poor in local finances.

Chae Eun-dong, a research fellow at the Institute for Democracy, released a report titled "Burdens and Benefits of Comprehensive Real Estate Holding Tax by Region,” which estimated the increase and decrease in local tax revenue if the tax is abolished based on data received from the National Tax Service. The comprehensive real estate holding tax is entirely used to finance real estate grants, which are distributed to local governments, and the less financially independent local governments receive more real estate grants. Chae analyzed the revenues from last year's comprehensive real estate holding tax, assuming that the government does not redistribute them to other local governments but adds them to the property tax of the local governments where the comprehensive real estate holding tax was collected.

According to the analysis, Seoul, Gyeonggi Province, Daejeon, and Sejong are the local governments that would benefit from abolishing the tax and integrating it into property tax. In Seoul alone, the fiscal income will increase by about 2.4 trillion won. This includes the increase of 969.4 billion in the three districts of Gangnam, Seoul, and 1.4 trillion in the 14 districts of Gangbuk, Seoul. Gyeonggi Province (400 billion won), Daejeon (682 billion won), and Sejong (54 billion won) will also see a rise in revenue.

In Seoul alone, the largest beneficiary of the abolition is Gangnam-gu, which will receive excess tax revenue of 580 billion won. This is followed by Jung-gu (464 billion won), Seocho-gu (308.2 billion won), Yeongdeungpo-gu (171.9 billion won), Yongsan-gu (119.4 billion won), and Jongno-gu (119.1 billion won). Songpa-gu, which is one of the three districts of Gangnam, also earns another 81.3 billion won.

On the other hand, the eight districts in Gangbuk, Seoul, which have poor finances, will see a decrease in revenue of 88.2 billion won. They include Dobong-gu (-16.9 billion won), Nowon-gu (-16.7 billion won), Jungnang-gu (-16.5 billion won), Gangbuk-gu (-15.8 billion won), Eunpyeong-gu (-12 billion won), Gwanak-gu (-6.3 billion won), Dongdaemun-gu (-31 billion won), and Guro-gu (-9 billion won).

Excluding Seoul, Gyeonggi Province, Sejong, and Daejeon, 13 cities saw a decrease of 238.38 billion in fiscal revenue. South Jeolla Province is hit the hardest with a decrease of 378.3 billion won. It is followed by North Gyeongsang Province (-375.4 billion won), Gangwon Province (-31.5 billion won), North Jeolla Province (-277.1 billion won), South Gyeongsang Province (-256 billion won), South Chungcheong Province (-234.4 billion won), North Chungcheong Province (-189.8 billion won), Busan (-105.7 billion won), Daegu (-94.6 billion won), Ulsan (-58.6 billion won), Gwangju (-50.2 billion won), Incheon (-469 billion won), and Jeju (-8 billion won).

※This article has undergone review by a professional translator after being translated by an AI translation tool.