Abstract

Property taxes in Korea have been used as policy instruments for economic stimulus or restricting speculation in real estate rather than as a source for tax revenue. The comprehensive real estate holding tax (CREHT) also has a greater role as a policy instrument. Using taxation for economic and social policy purposes can be controversial because it may violate the principle of equality in taxation. From this perspective, this study analyzes the current issues regarding CREHT and provides policy recommendations. The implications can be summarized as follows. CREHT is burdensome on taxpayers since it does not take into account people’s tax－paying ability. After the Constitutional Court ruled that CREHT is partially unconstitutional in late 2008,tax reductions have been offered to long－term single residence owners and aged owners in retirement. However, the tax burden is still excessively high. Moreover, while CREHT formally has dual purposes as a policy instrument and as a source of tax revenue, the two purposes are conflicting and lead to an unclear identity of the tax. Some problems arising from the unclear identity include whether CREHT should become a national tax and excessive burden on taxpayers. Therefore, CREHT should focus on one of the two purposes and be revised to serve the specific purpose. This study concludes that, in the long－term, CREHT should be used as a source of revenue for local governments.

Keywords

• Real estate holding tax system
• comprehensive real estate tax
• Property tax

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